Naserian is a mother of two and has been an independent contractor working on both online and offline short-term projects for about three years, and only receiving payment upon completing the work. Unlike her friend Taipei, she is not a permanent employee who earns a monthly salary and is eligible for benefits.
Naserian, like many people in Kenya, Africa and around the world, is a gig worker. The concept of gig work is not new, as gig workers have been in existence since time immemorial. However, with global digitisation and technological advancements, the idea and nature of work is changing. The online gig economy has steadily grown and is transforming how people think about and access work opportunities. It is slowly transitioning the workforce of offline gig workers towards more accessible, competitive, and consistent job opportunities on online gig platforms such as Uber, Sendy, Fiverr, Upwork, Glovo, Fundis, Red Ant Directory etc.
According to a recent report by Mastercard, the global gig economy is valued at $193 billion and is growing at a projected annual rate of 17.4% and is forecast to be worth $455 billion by 2023. It includes 40.7 million gig workers on various digital platforms globally, generating $193 billion in gross volume and $127 billion in disbursements to gig workers, a trend that is similar in many countries.
Mercy Corps reports that the Kenyan online gig economy is valued at $109 million and employs over 36,000 gig workers. It is projected to grow at an annual rate of 33% in five years, almost twice the global growth rate, reaching $345 million and with close to 100,000 gig workers by 2023. High mobile, internet, smartphone penetration, a growing youthful population of approximately 20.1%, and a highly unemployed workforce looking for work supports this growth. With so many young people looking for employment, innovation and adaptation in the job market are
critical. Only 17% of the working population is formally employed, with a majority (between 15-34 years old) accounting for 84% of the unemployed.
Despite the rapid expansion of the gig economy, there is limited research on essential financial Services for gig economy workers which has led to little investment and development of their financial needs.
For workers like Naserian, several factors that can affect their ability to find work and generate an income. Unlike Taipei, Gig workers are not permanent employees of online platforms thus may not have access to benefits such as insurance, savings, and investments. They may lack knowledge of, accessibility to, and ability to manage these facilities outside permanent employment. However, this is not the case in every country, and some countries are passing bills outlining how gig workers should be treated. The U.K’s Supreme Court upheld a ruling that Uber drivers were workers, not independent contractors. Uber now treats all 70,000 of its drivers in Britain as “workers” are entitled to a minimum wage, holiday pay and pension plans. This ruling is poised to have significant implications for the broader gig economy.
Gig workers have unique financial needs that distinguish them from permanent employees, including inconsistent and unpredictable income patterns, the need to access credit, insurance, savings and investments, payments processing and tax requirements. Many gig workers are underbanked and lack access to resources that can grow their financial health and wellness. Availability of and access to the right financial services can help cushion them during periods where they have no work, given that many of them rely on payments from Gig work to make ends meet. The very nature of gig work, especially during the coronavirus pandemic, has resulted in vulnerability and financial exclusion for underserved workers.
The growth of the gig economy and Fintech go hand in hand. Financial technology (or fintech) providers are at the forefront of providing innovative solutions to address the inaccessibility of financial services for gig workers, especially where incumbent institutions have fallen short. By better understanding the different segments of the gig economy and their unmet needs within those segments, the following Fintech’s have begun to provide relevant and timely solutions that generate real value for a significant portion of gig workers. However, there still is room to develop more inclusive and innovative solutions.
Financial education & wellness
Financial account Fintech’s focusing on financial education and wellness help gig workers learn about, manage, save, and invest their money better by understanding their finances, lifestyle, motivations, and values behind their concept of money.
A fintech company called Power helps gig workers across Africa control their financial well-being and relieve finance-related stress by building their digital financial profiles and credit scores and eliminating debt. Another fintech, Steady, is an income advocate and financial health platform for the independent gig workers helping fill the underemployed income gaps, defining an individual’s portfolio of work in the Future of Work, and providing curated inclusive finance. Steady lets users link in their bank data so that it can track their income across multiple jobs.
Financial account
A key pain point for gig workers is accessing a financial account that meets their needs. Gig workers receive payments in numerous currencies such as USD, GBP, or EUR, which can be a cumbersome process to manage. Platform providers should work with many payment platforms like Payoneer, Wise, Skrill, PayPal, etc., to enable anyone, anytime, anywhere globally to get paid near real-time.
Another example is the Moves Spending Account, an online bank account designed explicitly for gig workers looking for an easy but powerful way to manage their gig earnings all in one place. It helps reduce the financial risks stemming from the unpredictability and volatility rooted in gig work. Additionally, Fintech’s like Cogni, a digital bank designed with gig workers in mind and with features that traditional banks do not offer, provide curated financial and lifestyle services on their mobile apps.
Payments
Gig workers want access to income as soon as possible after the work is done, which helps alleviate income volatility. Fast and easy access to payments is essential to keeping gig workers engaged, happy and satisfied. Pay-out options influence gig workers initially to choose to work with and how long they will stay. As the gig economy grows, so will the importance of providing flexible payment solutions by paying people the way they want to be paid will also increase.
Gig platforms need to find new ways to differentiate themselves from their competitors by using innovative payment platforms and services, offering real-time payment rails, bypassing slower batch payment systems to speed up payroll by 1-2 days. Additionally, it is important to note that payment systems are continuously evolving. Gig platforms must monitor global current and long-term trends and anticipate the impact of any changes. One exciting development is the adoption of unregulated cryptocurrencies such as Bitcoin and Ethereum as a medium of exchange by some users and the launch of Central Bank Digital Currencies (CBDCs), e.g., the U.S. digital dollar, E.U. digital Euro, the Chinese Digital Yuan etc. These developments could impact how gig workers would like to get paid.
Invoicing
Paper-based invoices can cause financial friction, both for gig workers freelancers and the platforms with which they work; therefore, invoices need to be automated using technology and advanced learning tools such as artificial intelligence. French FinTech Shine.fr is a mobile bank that offers a management platform to gig workers for online banking with contract and invoice management. It has an invoicing feature that allows users to insure their outstanding invoices by paying a 2% fee of the total invoice to insure these documents against delayed or missing payments. Shine then contacts firms with outstanding amounts on the gig workers behalf to get these funds to waiting gig workers faster.
Filing taxes
Gig workers’ pay taxes, and some apps help them determine how much they need to pay, based on the specific country requirements. Workers can use business expenses using apps like Expensify, which capture Track and generate expense reports, after which they can determine how much they owe as tax. Another option is the free Mint budgeting app which offers basic budgeting features and provides bill payment reminders and customised alerts when over budget. Some tax apps, including Track, use machine learning to estimate and auto-remit taxes to the tax regulatory authority for gig workers, entrepreneurs, and small business owners.
Savings
The path to retirement for gig workers is less certain as it lacks the predictability that is important in retirement planning. Gig workers in many African countries report that their savings are quickly depleting. Their families are drawing closer to a total lack of basic needs, i.e., food, shelter, and clothing. Therefore, they must set some money aside and build up savings for a rainy day. A study conducted by Stash Financial, Inc. interviewed 1,240 current gig economy workers and found that the vast majority receive no employment benefits at all and that nearly 30% of gig economy workers did not have an emergency fund. This means they had no savings ofany kind, leaving them vulnerable and more susceptible to financial hardship should they miss work due to an emergency. Therefore, it is critical to have enough money saved up in case of an emergency. Digit, Chime, Cowrywise, etc., can help all gig workers build an emergency fund to cushion them from future shocks.
Investments
Gig workers often have to develop their investment portfolios to create wealth. The good news is that there are many local and international investment and wealth creation and management options available today. Gig workers can invest in local shares, bills, bonds, money market funds, startups etc., and with the democratisation of finance, they are also free to invest in international markets. Many apps offer the opportunity for fractional investment, which means one can start investing with as little as, or less than, a dollar. One option would be investing via digital platforms such as Robinhood, which provides a commission-free investment platform. This means one can trade in stocks, ETFs, gold, cryptocurrency, and options without paying any fees. One can also earn a 0.3% annual interest on unutilised funds in the account. Stash works for those who are new to investing but need help getting started., It offers options for roundups, periodic investments, and auto-investments. It provides investment suggestions based on individual goals and risk levels and allows one to make the final decision. Betterment is a wealth management app that enables goal-based investments. One can set goals for, e.g. a dream home, wealth building, and retirement.
The platform uses Robo-advisors to provide investment suggestions based on these goals. Lastly, eToro allows users to trade currencies, commodities, indices, and stocks. These are just a few of the many investment options available.
Credit
There is a need for mobile or digital lending products. This space has historically been home to predatory lenders. However, several startups have started introducing consumer-friendly products to help address this. Examples include Prosper and Upstart. Consumers without digital credit profiles have fewer alternatives to access credit, leading to a vicious debt cycle. Fintechs like Qwil are needed. It focuses on providing working capital for gig workers and works with marketplaces, payment providers, and human resources platforms to offer cash advances to their users. Qwil’s underwriting process conducts identity verification, fraud checks and assesses gig workers’ creditworthiness by capturing data regarding a freelancer’s invoicing status.
Escrow services
The Gig Economy Tracker reports that Gig workers are accustomed to hunting down late payments from companies, with 71% noting they have worked with firms that have paid them late or not paid at all. They often don’t have protection if a client refuses to pay for work done or cancels at the last minute, and at times are forced to chase clients down to get paid after they’ve completed the job. There is also no guarantee of delivery for the client after an initial upfront payment, which presents a risk to them as well.
Digital escrows work by assuring gig workers that clients are both willing and able to pay for their services. And for clients, digital escrows enable them to see if the assigned work has been completed to satisfaction before releasing the payment. Fintech companies like Paybase, Vesicash and Payscrow hold the money in trust in an escrow account. It is neither with the worker nor the client and can only be released once both parties have given the go-ahead, which is excellent for both parties.
Insurance
Gig workers are complicated to insure due to their on-demand and unpredictable nature, lack of structured contracts, and poor and inconsistent pay. Many gig workers do not have suitable healthcare insurance despite the high health risk present in their day-to-day work. For example, motorbike riders who handle deliveries are in greater danger of being involved in accidents, which may cause permanent disability or contracting diseases such as coronavirus due to constant contact with products and people. Zego provides pay-as-you-go insurance for drivers and riders working for sharing economy companies, including Deliveroo, UberEATS, Jinn, and Amazon, who only pay, via an app or top-up card, for cover for the hours they work. Health insurance has traditionally targeted permanent employees, with very few insurance companies providing adequate and accessible products to gig workers. Even health coverage systems such as the National Hospital Insurance.
Fund, the nature of gig work may not offer consistent income to pockets, sell assets or borrow money to cater to medical services for themselves and family members when the time comes.
Pilot programs can help prove that well-designed, tailored solutions are needed to meet the needs of gig workers like Naserian; however, questions remain on who should be responsible for providing these relevant solutions and to what extent. It is important to note that any innovation will need to consider mobile and, by extension, mobile money as its rails. According to the GSMA, there are 310 mobile money services across 96 countries, with over 1.21 billion users, some of who are likely to be gig workers. Africa, particularly the Sub-Saharan region, is a global leader in mobile money services with over half a billion accounts and ripe for innovation. For sure, the best course of action is a system-wide approach where public and private sectors collaborate to ensure the best possible outcome for the gig economy at large.
