Disrupting finance: The gig economy’s radical reboot of banking and business

From rideshare drivers to virtual assistants, millions of people earn a living through gig work. There are currently 64 million gig workers in the U.S., according to Upwork, a freelance marketplace. These individuals comprised 38% of the workforce and contributed nearly $1.3 trillion to the economy in 2023.

While the gig economy is booming, and expected to grow 19% annually from 2024 -2031, traditional financial services haven’t yet caught up to meet the needs of this growing population. Gig workers — who basically run their own entrepreneurial enterprises — shouldn’t have to rely on personal banking accounts alone to manage their income. Whether it’s expanding access to credit or offering flexible payment solutions, banks can empower gig workers with better financial tools to maintain their livelihoods.

Navigating the gig economy: Current financial challenges for gig workers

Gig workers often face challenges in accessing traditional financial resources that full-time employees typically enjoy. As self-employed individuals, they may struggle to demonstrate a stable income. Their earnings can fluctuate significantly from week to week, complicating budgeting and making it hard to determine if they will have enough to cover both business and personal expenses.

According to a report by Rollee on the gig economy equality gap, 45% of gig workers say their finances are fair, and 19% say their finances are poor. The study also found gig workers have trouble accessing credit. Roughly 6 in 10 have been denied loans despite having a good credit score, and a majority have had to apply to at least three lenders before they were approved.

Individuals who earn most of their income through gig work are also responsible for covering their retirement and insurance needs. A World Bank study found that nearly half didn’t have a retirement account, while separate research finds many are underinsured because they can’t afford health or business insurance.

Many gig workers are first-time entrepreneurs who could greatly benefit from financial education and literacy tools. These resources can help them manage taxes, handle fluctuating income and plan for retirement effectively.

Nearly 4 in 10 gig workers have considered going back to traditional employment just to gain access to financial services. Many also rely on non-banking payment apps to manage their income, indicating that banks aren’t fully meeting their needs. To better serve gig workers, banks could improve their offerings by providing tailored financial tools and integrating with gig payment platforms, giving these workers greater visibility and resources to manage their finances.

Banks can offer a range of customized financial products to meet gig workers where they are and help them grow their businesses.

Propelling the gig economy: How banks can financially empower workers

Gig workers often have variable incomes, so they could benefit from real-time payment solutions that help them access their earnings faster rather than relying on the traditional weekly or bi-weekly payroll cycles.

Banks can also provide tools that help with tax management, such as built-in business banking account calculators that provide an estimated quarterly tax payment based on a gig worker’s earnings. They could partner with third-party providers, such as accounting and bookkeeping platforms, to deliver a one-stop solution for gig workers’ financial needs. This can help gig workers streamline their tax reporting and filing process every year.

Additionally, banks can address the needs of gig workers by providing not just software solutions, but also hardware solutions. With new account sign-ups, they could issue a device preloaded with their app and financial education tools. These devices can help banks enhance financial literacy for gig workers while providing an easy way to communicate. They can send push notifications about new offers, financial planning reminders or payment updates.

To expand financial access for gig workers, banks may need to rethink the approach to credit decisions. Gig workers often have fluctuating incomes, which most lenders view as a greater risk than traditional W-2 employees. In fact, 36% of financial institutions surveyed by Rollee said they are more likely to approve an application from a traditionally employed worker than a gig worker because they have greater income transparency and employment data. However, banks need to weigh other variables as part of the lending process, such as how long a worker has been in business, income consistency, how well they manage expenses and cash outflow vs. inflow. Banks may also factor in personal savings and assets that demonstrate financial stability.

Like other professionals, gig workers care about protecting their financial futures. Banks can address these concerns by offering customized savings, retirement tools and insurance packages. Products and features such as high-yield savings accounts, flexible health insurance plans, and self-directed IRAs with targeted sign-up incentives, bonuses, and lower balance threshold requirements to help workers avoid monthly maintenance fees are all valuable. Low-cost or disability and liability insurance options and affordable retirement and life insurance bundles, such as a universal life policy with a cash value component, can also provide much-needed financial protection for gig workers.

Supporting workers with tailored financial solutions

Gig workers contribute so much to the economy, and there’s more banks can do to support this vital part of the nation’s workforce. Whether it’s providing user-friendly tax and expense management tools or expanding access to credit lines and business loans, banks can grow their customer base by offering financial solutions tailored to the needs of these modern-day entrepreneurs.

Learn more about the financial services industry and how Samsung solutions can help here.

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