Morgan Stanley predicts that within the next five years, half the world’s workers will be participating in the freelance and gig economies in some capacity. And a 2020 study by freelancer platform UpWork reports more than a third of the total American workforce generate $1.2 trillion annually from it.
For some, these new, primarily digital economies offer supplementary income opportunities. But others opt exclusively for the opportunity provided by flexible working hours to live more balanced lifestyles and control their destinies. And increasingly, employers are restructuring their organizations to cater to them.
Whether they’re part-timers adding to family savings, or high-earning individuals providing scarce skill sets, gig workers are an untapped market for financial service providers who can address their unique needs. But what are these needs, and how are they being addressed?
Gig Workers Need New Banking and Financial Products
One problem with the rapid rise of the gig economy, in large part accelerated by the COVID-19 pandemic, is that traditional financial services have not adapted for gig workers’ banking needs. And because none of the traditional institutions like banks and credit unions were targeting the new sector, none regarded themselves as losing market share. This was a potential opportunity that FinTechs have been rapidly picking up.
Initially, FinTechs focused on niche demographic sectors such as women or ethnic minorities. But these markets don’t necessarily have unique banking needs the way gig workers do. Gig economy workers are most distinguished by erratic and inconsistent income from their customers. This makes it challenging to apply for credit and denies them access to many investment options.
They have unique health insurance needs because they don’t receive assistance from an employer and often fall through the cracks of traditional insurance cover. In a medical emergency, they may be unable to cover medical expenses, and their families can be left without income and protection. They also have unique tax requirements.
Traditional banks and service providers have been slow to respond to these needs for several reasons. Firstly, because they do not recognize them, and secondly because changing established procedures is a slow process in these institutions at the best of times. But the biggest impediment is the lack of data on financial activities that are often unregistered.
Some FinTechs Serving Gig Workers’ Needs
FinTechs are more flexible and faster to adapt to this need. For example, they can calculate risks using artificial intelligence technology in a fraction of the time it takes traditional banks. They can then use this data to attract gig workers with flexible payments solutions, quick (automated) turnaround times, and the convenience of twenty-four platforms with intuitive interfaces.
The following are some of the FinTech firms providing innovative solutions to freelancers:
Joust
Joust is America’s first all-inclusive banking platform for gig workers. It offers clients protection against late and nonpayments. And it gives users the ability to process credit and debit card payments for their goods and services.
Qwil
Qwil delivers working capital to independent contractors to help bridge the average 90-day payment gap between submitting their invoices and being paid. The organization provides freelancers with cash advances as soon as their invoices are approved for a flat fee of around 1 percent of the loan amount. In addition, it works directly with freelancer platforms and payment providers to assess risk and can save gig workers from having to turn to predatory lenders who levy excessive charges.
Oxygen
Challenger bank, Oxygen, provides financial services tailored to freelancers and independent contractors. It sources data from credit reports and bank accounts to generate cash flow information that allows it to advance loans and offer products such as debit cards to gig workers for a flat fee of around $30 monthly.
Onsurity
Onsurity is an Indian employee healthcare platform that uses innovation and technology to provide affordable monthly subscription-based healthcare solutions to over 20,000 people, including gig workers. In addition, it allows workers to retain their membership as they move between clients, saving them from having to pay almost double in premiums.
Salaryo
Salaryo provides subscription-based working capital, with monthly fees starting at just $10. In addition, it can assist with security deposit financing for coworking tenants.
Tartan
Tartan uses income and employment data to help gig workers, who typically have low or no credit scores, verify their income and employment status. It has contracted with delivery apps in India that employ about a million gig workers.
Steady
Los Angeles-based Steady advises and advocates for American residents seeking stable income to build a business or achieve some other goal. Its groundbreaking app-based platform helps its 1.7 million members obtain financial advice and find jobs quickly. It also gives them suggestions about how to save money on financial services and products such as insurance and tax preparation assistance.
These and other innovative FinTech companies are making the lives of gig workers significantly easier and reaping financial rewards themselves through the innovative use of data and technology.