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In our previous post, we explored the growing pressures facing today’s lenders. Rising delinquencies and shrinking margins are requiring lenders to rethink traditional strategies and explore more innovative approaches to protect portfolio health. We also outlined why Pay by Paycheck has emerged as a powerful solution for reducing defaults while delivering meaningful benefits to borrowers.
However, rolling out a successful program is easier said than done. Without the right implementation, a Pay by Paycheck program can raise costs‑to‑serve and undermine the very margin gains it’s designed to deliver.
Implementing Pay by Paycheck hasn’t been easy
Despite its advantages, Pay by Paycheck has historically been difficult to deploy at scale. Outdated workflows and technologies have led to common challenges like:
- Error prone and inefficient loan origination: Reliance on outdated documents, self‑reported data and manual review processes increased the likelihood of errors, fraud risk, and delay decision making.
- High-friction borrower experience: When opting-in to Pay by Paycheck, borrowers had to initiate direct deposit changes via paper forms or external portals - a frustrating journey that led to high abandonment rates.
- Delayed activation: With no real-time visibility into their borrowers’ deposit updates, lenders waited for the first deposit to hit an account prior to confirming enrollment, creating uncertainty and delayed activation.
- Lack of ongoing visibility: Once set up, lenders had no way to track changes in income, employment, or deposit allocation, leaving them exposed to long‑term repayment risk.
In an environment where net interest margins have compressed by nearly 15% from pre-pandemic levels, lenders can’t afford to roll out solutions that introduce manual overhead, suboptimal customer experiences, or unpredictable repayment dynamics.
To realize the true value of a Pay by Paycheck program, lenders need to roll out a solution that is cost‑effective, reliable, and borrower‑friendly—end to end.
Why Pinwheel makes a difference
Pinwheel’s product suite delivers the modern infrastructure that turns Pay by Paycheck from a promising idea into a proven growth strategy. By connecting directly to payroll systems, we help lenders lower default risk and reduce cost-to-serve - without sacrificing customer experience.
Pinwheel Verify
To launch a Pay by Paycheck program, it starts with confidence at loan approval. Pinwheel Verify enables borrowers to connect lenders with their FCRA-permissible, payroll provider data. This real-time, source-of-truth-data, reduces fraud risk, eliminates manual errors, and accelerates decision making so lenders can approve more loans with greater speed and confidence - laying the groundwork for a high-performing Pay by Paycheck offering.
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Pinwheel Deposit Switch
Securing repayment is the most critical component of Pay by Paycheck—and timing matters. Pinwheel Deposit Switch enables borrowers to immediately redirect their direct deposit, while providing lenders with real-time confirmation of whether the enrollment was successful or not. Unlike manual forms or external payroll portals, our solution delivers a seamless, in-app experience that eliminates friction for the borrower and overhead for the lender.With 30% more successful direct deposit enrollments than competing solutions, Pinwheel Deposit Switch removes the guesswork and reduces delays - ensuring repayment is aligned with payday. The result: lower delinquency risk, better cash flow predictability, and a dramatically improved customer experience - all while cutting the operational costs of legacy switching workflows.
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Pinwheel Connected Accounts
Finally, maintaining visibility after a borrower opts-in is essential to mitigating long-term risk in a Pay by Paycheck model. Pinwheel Connected Accounts provides real-time monitoring of a borrower’s payroll data—allowing lenders to track changes in income, employment status, or deposit allocation as they happen. This continuous insight empowers lenders to proactively manage servicing and collections, prevent delinquencies, and intervene early with modified repayment options when risk increases. By keeping lenders connected to borrowers beyond day one, Connected Accounts supports healthier portfolios, smarter servicing strategies, and sustained repayment performance.Together, these products give lenders a 360° view of their borrowers, enabling confident lending and durable repayment performance. Leaders reduce risk, improve operational efficiency, and reclaim margin lost to inefficiencies—all while delivering a better customer experience.
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The Time Is Now
The challenges facing lenders today - rising defaults, tighter margins, and increasing regulatory scrutiny - aren’t going away. But with the right infrastructure, they can be turned into opportunity.
Pinwheel empowers lenders to modernize their strategies with real-time payroll connectivity, enabling a compliant, efficient, user friendly, and high-performing Pay by Paycheck program.
Let’s build the future of lending - together.
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