Gig Economy: Unrealised Fintech Opportunities

Adam Dowsett
March 22, 2022

The gig economy is booming as more people choose to enter into the flexible workplace, either out of necessity or choice - and fintechs have been catching on. But there’s so much more that can serve this burgeoning community. 

The gig economy and its workers 

By its definition, a gig economy is a free market system that consists of temporary positions or contracts for independent workers. While it’s been around for decades most notably starting as temporary labour post-WW2, today we are seeing it flourish in the form of freelancers, drivers and even dog walkers. 

The gig economy was already gathering pace prior to the pandemic, however as business structures were forced to change, budgets readjusted and remote working became more normalised and necessary, the gig economy is now booming. It’s been predicted that by 2027, over 50% of the US workforce will be freelancers and that more than 80% of large corporations plan to substantially increase their use of a flexible workforce. 

While gig workers are typically viewed as contractors and freelancers, a significant portion of the workforce take on short-term work in addition to their full-time roles for various reasons, including bolstering income or engaging in and managing their own small business on the side. The flexibility it affords means that marginalised communities - those with disabilities or full-time parents or carers - can work around their own tight and often demanding schedules. It’s no longer an either-or scenario. 

A reliance on tech 

The technology evolution has made this type of work more accessible too, as apps and businesses like Uber, Fiverr and Deliveroo have made their way into the mainstream. This has meant that it’s not only the tech-savvy millennials and Gen-Zs making up the workforce, but also baby boomers and Gen-X who want to continue to contribute to the economy on their own terms. Apps are becoming increasingly user-friendly and intuitive, which is enabling the older generations to participate and benefit from them. 

As this digitalisation has provided more opportunities, particularly on an international basis, gig workers are typically online platform workers responding to market demands. While this can work well during the peaks, in the case of the recent Ukraine-Russia crisis, the heavy reliance on technology platforms has seen gig workers instantly lose all their income streams as big tech companies pulled out of Russia in response to its attacks. 

However, the gig economy’s reliance on technology goes beyond sourcing work and new contracts, and extends into the financial and administrative elements of running a small business too. Without teams of accountants and project managers, gig workers are more likely to look to platforms that help with project scheduling, invoice management and chasing, and cash flow insights helping towards tax management and banking. 

The gig worker and tech essentially go hand-in-hand. 

Data and Open Banking 

Already heavily invested in tech platforms, gig workers are benefitting from the rise of Open Banking and APIs as it opens the door for a more financially-inclusive world. This Open Finance model allows for the secure sharing of financial data to third parties on a voluntary basis, improving efficiency, security and accessibility for the end user.  

While there may not be much activity on a traditional bank account of a gig worker, Open APIs don’t discriminate and can be made available between any digital platforms - including those used to receive payments, issue invoices and withdraw funds. This type of data collection is entirely new for this segment and represents a great opportunity for gig workers and fintech solutions alike. 

For example, with such information now available, more robust and accurate risk assessments can be made by fintechs that could grant gig workers access to better products and services. It will also allow them to manage their business more efficiently as all necessary data can be collated and read by a single platform. 

Conversely, looking at real data contributes to the development of the solutions themselves as businesses can assess the real-life trends and needs of their customers.  

New fintech solutions to support gig workers

The most significant gap between the gig economy and corporate world is in financial literacy and risk management. Where employees and the corporations who hire them have access to traditional methods and experts for loan securement, risk assessment and accounting and payments, there isn’t the equivalent for freelancers and contractors as the old rules and new methods clash. Where flexibility is at the heart of the gig economy, the rest of the world hasn’t caught up in its agility. 

There have been changes to this however, as Lyft and Uber introduced instant access to payments for drivers over five years ago. Since then, half of all Lyft drivers cash out their payments instantly, better reflecting the on-demand nature of the app and the economy itself. Such step changes enable better cash flow management and helps to smooth out income volatility that is knowingly very common within this fluctuating market.  

Other progress includes businesses like Tartan, who directly serve the typical freelancer with multiple income streams. Using a single API, the app pulls real-time income and employment data to assist simpler and more efficient risk assessments. 

Further opportunities that will help the wider economy lie within the freelancer’s one-person business itself. Smoother, faster payment transfer apps like Hopscotch take away pain points for B2B instant payments, while easily integrating with accounting software for immediate reconciliation. This type of data exchange between digital platforms via API that keeps returning back to accountancy software is how the gig economy, and those working within its market, will see a significant improvement in their business and day-to-day tasks. This simplified, embedded nature represents a tangible increase in time savings and revenue. 

However, smart accounting and risk management for the resource and time-poor has plenty of room to go further. For example, invoice management for SMEs and gig workers currently only goes as far as issuing, sending, chasing and receiving - despite the nature of the business commonly involving international trade. Unlike large corporations, varying currencies and foreign exchange risk - and ultimately final payment - still isn’t factored in as it should be. 

The lack of corporate-level smart accounting and risk management leaves the gig economy exposed and unable to reach its full potential - but it creates a huge opportunity for the right, gig worker-focused fintech solution. Herein lies the gap that needs filling, but crucially, it will need to take the freelancer on an educational journey for them to realise what they’re missing out on. This is what will drive its demand.  

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