Tailoring Banking to the Needs of Today’s Gig Economy Workers

As unemployment soars and businesses tank, more Americans may be seeking a living as gig workers....

By Arcady Lapiro 01 May 2020

Tailoring Banking to the Needs of Today’s Gig Economy Workers

As unemployment soars and businesses tank, more Americans may be seeking a living as gig workers, at least temporarily. Banks and credit unions have an opportunity to build products specifically for the special needs of this demographic group.

Gig economy work has grown more common over the past decade, and some forms of it have come very visibly to the forefront as the COVID-19 pandemic spreads, and people bound at home by age or health conditions relied on gig economy shoppers to provide them with essentials or deliveries from restaurants. Gig workers have found themselves on the front-line in the coronavirus era, enabling many to self-isolate.

Postmates, Instacart, Uber and other new age forms of business have redefined certain services. Many of these types of jobs have been around for years, but for multiple reasons, including the advent of websites facilitating matches between those who need services and those who provide them, this has been a growing factor in our economy, and the world economy.

Some portions of the gig economy, broadly defined, have had troubles in this period — Airbnb property owners who went into debt to create more inventory are suffering right now, for example, and ride-sharing has been hurt. But clearly, especially as other jobs disappear or employees remain on furlough, gig work is going to become a more popular option.

What makes these types of jobs unique is that as contract workers, people who perform gig chores have considerable control over their schedule. They can often break free from the typical workweek — at least, as seen in normal times. The gig worker simply taps into the app of their platform of choice when they’re ready for work based on their own availability and accepts the contract-jobs they wish to complete. Companies like shopping services have both increased their gig worker numbers and increased their delivery price as they strive to meet the demand of their customers.

While more people are joining the ranks of the gig economy force, for the most part the banking industry isn’t meeting their needs nor the needs of many Americans who do contract work. Yet this is a niche waiting for someone to serve with tailored products that can assist with the real-time cash management needs of gig workers while also providing robust banking offerings.

Gig Economy Finance 101 for Financial Institutions

Because these workers are not full-time employees, and their income often variable, their banking needs look very different from the typical worker’s requirements. For example, instead of a direct deposit paycheck, they are often paid by the job — sometimes on the day of their work.

Historically, many of these individuals have been part of the 25% of the population that is either unbanked or underbanked. As unemployment spreads, this may change, but the needs of people earning their living this way will not. While Uber and other gig employers allow frequent cash outs, that cash must go somewhere, and Venmo and Square are limited in their capabilities for enabling the making of payments to utilities, mortgage companies and other retailers.

Gig workers who have a bank account with a traditional financial institution have the ability to use a physical debit card enabling them to spend their earnings for the day directly or by going to an ATM to get their cash (or branches, during times when there is not a lockdown in order).

These are great offerings for gig workers— but only if their financial institution can provide real-time deposit availability. That is something many banks and credit unions continue to work towards. Assuming their employer allows them access to their money, lack of being able to use it should not be because their financial institution can’t provide ready access to their earnings. Especially in a unique time like the COVD-19 pandemic, every dollar counts.

Those workers who do not have a traditional bank account and who don’t use cash-out capabilities available through Venmo or other services are limited to what they can do. They can send money to their peers but that is about it. Depending on the service, they may not even be given a physical debit card. This can inhibit their transaction types. While contactless may increasingly become the way things go, many places still lack point of sale terminals that can accept contactless cards and mobile wallet payments.

In order to serve gig workers financial institutions need to provide a robust and flexible suite of offerings that give both banked and typically underbanked individuals a reason to make the switch. Offerings like virtual and physical cards give them solutions for any type of debit card payment from P2P to ATM withdraws in a quick and efficient manner. Remember, many of these workers are relying on the fact that the work they completed that day turns into an instant paycheck to meet unexpected costs, pay their bills or to simply put food on the table.

The pandemic also has presented a challenge for financial institutions in getting customers set up for banking services. Gig workers should be able to quickly and easily open an account if they do not currently have one or are looking to switch to a financial institution with better offerings.

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