Agentic Credit Helps Banks Underwrite Uneven Income

§ 01 Executive Snapshot

• What: A shift in lending practices is emerging as banks adapt to the realities of fluctuating incomes for workers in the Labor Economy.
• Who: Financial institutions, borrowers in the Labor Economy, PYMNTS Intelligence, WorkWhile, Ingo Payments.
• Why it matters: This evolution in underwriting practices allows lenders to better assess the creditworthiness of borrowers with variable incomes, potentially expanding access to credit.

§ 02 Key Developments

• The Wage to Wallet™ Index report indicates that approximately 60 million Americans work in the Labor Economy, earning hourly wages of $50,000 or less annually.
• 41% of Labor Economy workers report feeling financial stress often, significantly higher than the 27.2% of higher-income workers.
• More than two in five Labor Economy workers use side income to cover everyday living expenses rather than to build savings, highlighting the precarious nature of their finances.

§ 03 Strategic Context

• Traditional underwriting models have relied heavily on stable employment and credit scores, which do not reflect the realities of modern income sources such as gig work and contract jobs.
• The emergence of agentic credit represents a significant shift towards real-time financial assessments, allowing lenders to consider ongoing income patterns instead of just historical data.

§ 04 Strategic Implications

• By adopting agentic credit practices, banks can improve their underwriting processes, leading to better loan approval rates and reduced false declines.
• This shift may enable financial institutions to expand their lending portfolios responsibly, catering to a growing demographic of workers with variable incomes.

§ 05 Risks & Constraints

• The reliance on technology and AI in credit assessment introduces potential risks related to data privacy, algorithmic bias, and the need for ongoing system maintenance.
• There remains a challenge in accurately interpreting the financial behavior of borrowers with inconsistent income streams, which could lead to misjudgments in creditworthiness.

§ 06 Watchlist / Forward Signals

• Future developments in AI and transaction intelligence technologies will be critical to the success of agentic credit methodologies.
• Monitoring the adoption rate of these new underwriting practices among financial institutions will provide insights into their effectiveness and market impact.