The global gig economy is expected to grow to $455bn by 2023, more than doubling from $204bn in 2018. Today, the gig economy is expanding at a CAGR of 15%, made up of thousands of workers who are in it by choice or necessity. However, regardless of the nature of gig work, the lack of stability remains its fundamental constant, placing gig workers in need of innovative financial services.
This article takes a closer look at the evolving gig economy and its financial needs that present a significant opportunity for financial service providers.
Under the hood
Who are these gig workers?
A 2016 McKinsey study identified four key profiles or personas:
- Free agents: Fully independent skilled workers who derive their primary income from gig work like marketers, writers, designers, or translators, offering their services digitally.
- Casual earners: Full-time workers (FTWs), skilled or semi-skilled, who explore other roles or pursue their passion through part-time gigs to earn extra cash.
- Reluctants: Reluctants doing gig work but prefer full-time roles, a mix of skilled and less skilled workers.
- Financially strapped: Those who are in it out of necessity, like ridesharing drivers or delivery personnel, entering due to the low entry barriers.
What is driving the ongoing expansion?
The gig economy beat all estimates, as it grew to a staggering 36% by 2020, against a 14-20% estimate of 2014. It is expected to grow further up to 50% by 2023. The pandemic was an inflexion point in this growth trajectory, driven by three key factors:
- Evolution of work technology: Many full-time workers forced to work remotely, were able to offer their services independently. Moreover, widespread digital adoption untethered many job functions from the office desks at scale, thereby turning them gig friendly.
- Growing appeal of flexibility: With nearly 70% of workers choosing gig work owing to its flexibility, it became vital for workers everywhere in the post-pandemic state of work. It enabled them to create a more balanced work-life, allowing them to spend more time with family, less time commuting, and opportunities for self-realization.
- Acceleration of e-commerce: Stay-at-home protocols fuelled a rapid rise in demand for logistics services, accelerating demand for delivery personnel for order fulfilment across industry segments.
The emergence of platforms like Fiverr and Upwork has provided further impetus to those looking to expand their practice to global clients.
Catering to the financial needs of gig workers
Though gig workers are made up of diverse demography, three financial requirements emerge common to all:
- Income and wealth management
Unlike salaried workers, gig workers are subject to an uncertain and variable flow of income, receiving payments for varying periods and no employer-sponsored retirement or insurance plans to fall back on. They can be offered financial services that systematically analyze and provide insights into their income patterns. Features enabling them to incorporate fractional savings into their spending patterns (like round-up savings). They can also be offered help in acquiring insurance and retirement plans. And education and awareness on the need for the same.
- Innovative financing options
Due to the unique nature of income patterns, gig workers appear less credible than regular salaried workers. In addition, financial products like loans and credit cards remain underserved by legacy service providers. Therefore, there is a huge unmet need for hassle-free, short-term, low-interest credit.
New or alternate evaluation criteria and AI-powered processes can be leveraged to analyze credit risk. Products that integrate with their income sources (platforms) for auto-debit with customizable repayment terms can be offered, tailored to suit the nature of gig work.
- Payment services
Skilled workers working for clients from other countries often require cross-border payment facilities with lucrative exchange rates. Speed of payment is also critical to cash flows. They can be offered speedy payment services with lucrative exchange rates, assisted tax filing services, and awareness and education programmes like those available for regular salaried workers.
The time to act is “now.”
Innovative financial services aimed at gig workers are being rolled out in the market as we speak; by fintech and big-tech players alike. Neobanks like Chime and fintech like TransferWise are rapidly becoming popular amongst gig workers, owing to some gig worker-friendly features they offer. Comviva has also helped numerous players in the industry launch such offerings with mobiquity® Pay. Needless to say, providing tailor-made offerings and features is an incredible opportunity for Legacy financial service providers to attract and retain gig workers.