The gig economy workforce has taken the economy by storm, shifting the landscape for businesses around the world. From Uber to Airbnb, employers are no longer confined to hiring local talent or making long-term commitments, while independent contractors and freelancers gain the flexibility that side-hustles have to offer. According to the latest statistics, the global gig economy is worth $3.7 trillion and keeps expanding.
Payments have changed too and are no longer the job of the banks alone, thanks to technology. Financial institutions have competition from fintech firms and payment platforms like PayPal, the latter of which are not restricted by banking hours and can transact faster. In case of blockchain, which is a type of decentralized ledger, peer-to-peer payments can be made in near real-time and, in some cases, on-demand. This makes it increasingly difficult for banks to compete in a market where workers are looking for ways around the delays and fees that are associated with legacy systems.
Rather than be left out in the cold, banks have the opportunity to capitalize on the vast amounts of data they have access to through which they can spot patterns. Instead of attempting to compete with fintech companies or other payment platforms with more advanced technology versus legacy systems, they could explore providing different services and taking more of an advisory role with customers.
In the U.S., for instance, fintech company Joust is behind a mobile banking app for iOS and Android that is targeting the country’s freelance workforce. Joust has partnered with regional banks who collect the deposits to deliver a bank account, small business account and access to credit.
In the U.K., where approximately 15% of the workforce is self-employed, a void left by traditional banks is filled by challenger banks. These don’t offer the suite of services that larger financial institutions provide, such as a brick-and-mortar location in some instances, and that suits freelancers just fine. These companies are not bogged down by legacy systems and can more easily embrace technology for services like invoicing, receipts, expense reports, etc.
There are still competitive opportunities due to chinks in the payments armor. For instance, nearly three-quarters of gig-economy workers would consider leaving the industry if current payment issues aren’t resolved, according to last year’s “Global Marketplace and Gig Economy Payment Satisfaction” report.
Workers are looking for better communication services when there are issues with payments (delays, etc). They also crave greater accuracy with payments and would like to be able to monitor the status along the way, kind of like being able to track an Uber driver and the subsequent payment made to them.
In the U.S., a banking startup dubbed Cogni is looking to fill that void. They are seemingly targeting millennials with features such as cash-back and a multi-currency wallet as well as tools to help them save and manage their money.
In France, a company called Shine is helping freelancers to get paid. Gig economy workers in France must register their business as a micro-company, and Shine makes the process easier in a single mobile app. Once registered, users can send and receive funds via the app similar to how mobile banking works. Customers gain access to an IBAN number and debit card, which gives transactions the feel of a bank.
Preferred Payment Methods
The method by which workers prefer to be paid depends largely on their jurisdiction. For instance, in the U.S., nearly 50% of respondents in the previously mentioned global payments survey desire “local bank transfer or ACH payments.” This compares to slightly more than one-fifth preferring PayPal. Meanwhile, international gig economy workers choose PayPal approximately one-third of the time and local bank transfers about one-quarter of the time. Two-thirds of non-U.S. workers would like to be compensated in their local currency.
More than two-thirds of those surveyed wish they could be paid sooner, with some even willing to take home a smaller paycheck in exchange for this feature. On-demand payments are becoming increasingly possible, with on-demand delivery service Postmates and Visa recently partnering to offer real-time payments to a bank account via a Visa or Mastercard debit card in exchange for a fee.
Of course, cash is king, but that could make things tricky when tax time comes around.