It’s very likely that you know people involved in the gig
economy, or you have the experience of being a part-time or full-time gig
worker yourself. Uber drivers, delivery men and women, designers, Airbnb hosts,
consultants, stand-up comedians, babysitters — these are just some of the jobs
gig workers are doing. The growth of the gig economy in recent years has become
an opportunity for many fintech ventures that recognise gig workers as
high-potential customers.
The rise of gig workers needing financial products
First of all, work outside traditional employment is, indeed,
getting more popular each year. According to a Mastercard research, the global
gig economy will generate a gross volume of about $455bn by 2023 which is twice
bigger than in 2018. The pandemic, though, might have accelerated the growth of
the gig economy due to the fact that many people had lost their full-time jobs
and had to go freelance. The Upwork’s 2020 study says that 36% of the total US
workforce freelance and earn $1.2trn annually from it.
Besides, nowadays digital platforms make it easy for gig
workers to get employed within hours with just a smartphone. Pew Research
Center reports that, as for 2021, 16% of America’s adults have ever earned
money from an online gig platform. The rise of the gig economy is also driven
by the popularity of the work-life balance philosophy, which stimulates people
to seek a more flexible schedule. The exponential growth, though, has its
disadvantages and leaves a lot of gaps. One of them is that traditional
financial services aren’t tailored for gig workers’ needs.
Financial gaps in the current marketplace
Gig workers may be good earners, but their income is often
erratic, sometimes paychecks differ from month to month. As a result, they have
problems with access to investment accounts, loans, insurance and other
financial products. It means they are likely to experience difficulties with
paying bills for unexpected emergencies, like medical treatment. It impacts the
financial well-being of the gig workers and their families negatively.
Traditional banks aren’t eager to solve these problems
because they are focused on the more premium audience and have little interest
in those who earn about $2000 - $3000 per month with their income peak yet to
come. Besides, brick-and-mortar financial institutions lack access to data
about financial behaviours of gig workers, who often have to keep their
financial activity unregistered. The lack of insights isn’t helping in filling
the gaps in the financial industry. And, anyway, mainstream banks are too slow
and complex in structure to take action fast. Fintech startups are more
suitable for this job.
What Fintech can change for gig workers
What fintech companies see in the gig economy is the
constantly rising number of the financially reliable potential customers who
are underserved by the traditional banks. In other words, it’s the lack of
competition mixed with the ability to help millions to access better living and
to earn some money by doing so. That’s why fintech startups choose this
direction. They attract customers with flexible payment solutions, lowered
fees, fast operating and the convenience of a thoroughly designed interface.
Ventures, such as B9, Chime, Earnin, and Brigit, are able to
calculate risks with the help of AI at incredible speed. They use it to provide
gig workers with quick access to advances on paychecks with zero fees. It’s
crucial for gig employees’ financial sustainability, so that in case of
emergency they don’t have to go to shady microcredit organizations and pay an
annual interest on borrowed money of about 500-700%. Sometimes the
circumstances don’t give people any other options. Unbanked and underbanked
communities are often targeted by predatory lenders, perpetuating patterns of
inequity. Digital banks are eager to make the financial environment safer and
more convenient for those involved in the gig economy.
Having a lot of data about customers under their belts,
these companies are able to target narrow segments of gig workers and create
more personalised offers. At the same time, they don’t have to put too much
effort and money into user acquisition because their clients are satisfied
enough to share the information about them with friends and acquaintances.
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