With the world evolving into a massive gig economy and hundreds of platforms offering freelancers the chance to create their own work schedule, it’s becoming easier for workers to provide affordable services to consumers. An estimated 34% of the global workforce works either freelance or for a gig platform, with this statistic projected to grow to 43% by the year 2020. On-demand services are increasingly driving this employment growth, and are incentivizing freelancers to shift from more traditional methods of obtaining work to finding employment on these platforms.
So, what does each party involved in the gig economy need to further enhance their experience? Workers, those who either freelance or sign employee contracts, have their own specific set of needs. Currently, about 46% of UK gig workers report being stressed over having enough money to finance their lives, and aren’t being paid fast enough to cover the cost of their bills. In the same study, 23% of workers said they lost up to 10% of their income due to fees and other costs associated with how they were being paid. Through these platforms, workers need to achieve a consistent level of earnings over time, the ability to pay commission to the platform without taking a large profit hit, withdraw or spend money they have earned, and the ability to provide for their own benefits (time off, insurance, retirement, etc.)
Of course, the platforms have needs, too. They need to focus on retaining their workers on a long-term basis to avoid a high turnover rate, which reportedly costs over $1,000 in some cities across the US; this is is a common problem many high-profile, ride-hailing companies face, for example. In order to do this, gig economy platforms need to have the ability to monetize and earn commissions from unbanked workers, so they are more inclined to stick with their gig economy profession without the added pressure over time of joining a bank.
What do the consumers require in a gig economy, though? To put it simply, they need a great customer experience. They need timely access to the service being provided, safe service from vetted workers and freelancers, and the ability to make transactions with the world’s most popular payment method – cash. Other methods of payment need to include a local debit card, an ATM or bank transfer, and a local e-wallet. To put it simply, international credit cards are not the dominant way consumers like to pay and the gig economy should take that into consideration.
For all parties involved, it is essential for the gig economy to adopt tools that manage funds and different forms of cash payments internationally, as well as scalable methods to monitor for compliance and fraud over time.
Why hasn’t the gig economy been able to fulfill these needs yet? Due to the diversity and the complexity of payment preferences and ecosystems across the world, most gig platforms are stuck implementing “old school” solutions when it comes to payment options. They are only accepting traditional credit cards and PayPal, without being able to efficiently support local payment methods or cash. With cash being the dominant form of payment worldwide, doesn’t it seem a bit unfair that unbanked consumers and workers can’t use it? Cash is still the reigning king over credit cards and checks as the most common form of payment, with bank transfers, modern instant payments like India’s UPI, older methods like Indonesia’s virtual accounts, and e-wallets following suit.
Cash isn’t going anywhere, anytime soon. Due to the cost of credit card processing hardware and the distribution of cards themselves, software-based solutions like e-wallets are expected to grow faster than credit card use in the same manner that mobile phone networks conquered landlines over the last twenty years. Renewed regulator vigor has enabled instant transfer platforms like India’s UPI and Singapore’s PayNow, as well as localized card schemes like RuPay, to flourish at faster rates and attract admirers around the world.
How can we actively pursue and implement local payment methods in our growing gig economy? We need to create a financial system that makes room for broader audiences to take part in the gig economy, starting with enterprises and their respective platforms. By embedding third party API’s into their infrastructures and systems, more unbanked consumers and gig economy freelancers will have access to local payment methods. In doing so they will be able to pay their own way, however they choose. Will local payment methods make their way into the gig economy over time? If we keep pushing and there is a high demand for it, then hopefully so.
The bottom line is that localized payment methods are used 71% of the time and need to be supported, implemented, and accepted by platforms to better suit the needs of all parties involved in the gig economy. While it may not be the only path to solving electronics payments globally, especially within the gig economy space, local payment methods allow platforms to service their workers more effectively and give consumers a carefree, cash-only experience.
About Arik Shtilman:
Arik Shtilman serves as the CEO of Rapyd, the B2B service enabling enterprises and mobile platforms to make digital payments and withdraw money through use of a single API. He is also a member of the Board of Directors at CashDash, a currency exchange mobile application for travelers that eliminates the need for carrying large amounts of cash between travel destinations. Prior to Rapyd, Arik was the CEO and founder of ITNAVIGATR, a cloud-based management and performance company, which was acquired by Avaya in 2013.
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