While the popularity of the phrase Gig Economy is new, the concept itself is not. Occasional, contract and hourly work schedules have existed for decades in industries such as construction, retail, food services, logistics and beyond.
That said, with the large number of new, technology enabled, on demand services and platforms that have appeared over the past 10 years, the ranks of individuals working in these roles has grown dramatically. The Federal Reserve estimated that in 2017 this number was as high as 75 million. There are few, if any, industries today that do not leverage a gig-style workforce in some manner. Transportation (Lyft and Uber), food delivery (DoorDash and Caviar) and consumer services (Wag and TaskRabbit) are a few industries with prominent companies known for their large gig workforces.
As the number of individuals earning their livelihood from gig employment increases, the financial needs of these individuals and the companies that employ them are changing too. This is where Banking-as-a-Service solutions, that enable businesses to embed payments and banking services directly into their applications, become invaluable.
On-Demand Services, On-Demand Pay
To provide on-demand service well and at scale means having an army of individuals at the ready to pick up an order, passenger or delivery when and where needed. Companies need ways to entice workers to log into their platform and fulfill their requests, but the promise of being able to earn where and when you want only goes so far if it’s slow and challenging for giggers to access their funds.
“…being able to earn where and when you want only goes so far if it’s slow and challenging for giggers to access their funds.”
Giving gig employees the ability to access their wages on demand, through a combination of real-time payments and branded company cards, for example, and directly from the company’s application enables individuals to earn extra cash when they need it to make income and expenses line up. That’s a strong draw.
In fact, the draw of accessing wages on demand is so strong, a host of well-funded startups have popped up enabling employers to deliver this service to full-time employees.. This is an added benefit for talent and retention. Even, PayActiv and FlexWage are a few examples of companies delivering on-demand payment solutions to employers. While these services all function slightly differently, they all rely on embedded banking and payments services to operate payroll services between employers and employees and to give employees the ability to access funds and manage their finances directly through the company’s app.
Financial and Wellness Resources
Once gig workers have their funds, they need resources to help them do the things a company typically does for its salaried employees, such as saving for retirement, setting aside funds for taxes and receiving health and wellness services. A handful of startups are garnering significant buzz and investment for solutions that untether financial management and wellness services from traditional employment to offer gig workers and freelancers easy access to the tools and resources they need.
Banking-as-a-Service enables these solutions by giving companies the freedom to create a user experience that aligns with the tools gig workers need, and how they want to access these tools, and easily integrate banking and payments components of that service into their interface.
“Companies that leverage Banking-as-a-Service solutions to offer workers outstanding financial tools and resources will have a fast-growing market and increasing competitive advantage.”
In 2018, Forbes reported on a survey showing that if the gig economy continues to grow at its current rate, more than 50% of the US workforce will be freelance workers by 2020. As more individuals join the ranks of giggers, freelancers and contractors, companies will need to evolve how they attract and support their workforce. Companies that leverage Banking-as-a-Service solutions to offer workers outstanding financial tools and resources will have a fast-growing market and increasing competitive advantage.
Have thoughts about the role of Banking-as-a-Service plays in the gig economy? Share your thoughts, we love hearing from you!
–The Open Platform Team