Coined by jazz musicians in the 1920s as a word to describe a casual job, these days a “gig” can mean any sort of musical performance, irrespective of size. Talking of gigs, Taylor Swift’s The Eras tour holds the record for the most tickets sold in one day — 2.4MM — and is the first tour to surpass $1B in revenue.“Gig” and “gigging” are also used to refer to short-term independent contractor work: the “gig economy” is a labor market made up of self-employed freelancers and contractors performing flexible, temporary jobs. While most gig workers probably only dream of earning the sort of sums that Taylor Swift does, this sector as a whole shouldn’t be ignored. With more people seeking more flexible working arrangements and more organizations seeking alternative ways to recruit and optimize efficiencies and costs, the gig economy continues to grow in importance. There were around 64MM freelancers in the US in 2023 — a number that is projected to reach over 90MM by 2028.While this type of work isn’t a new concept, we discuss how community financial institutions (CFIs) can best serve gig workers’ needs to capture a bigger slice of this thriving sector. Meeting Gig Workers’ Financial RequirementsGiven the unpredictability of their work and income, gig workers often have different financial service requirements compared to employees with set wages. Understanding these needs should enable CFIs to better position themselves as the freelancer’s preferred financial services provider. Here are a few key differences in the financial needs of gig workers and freelancers:
- Online and on-demand. Freelancers must often work whenever work is available — meaning they might have to work long hours, irregular hours, or even around the clock. Many use digital platforms to manage jobs, send invoices, and receive payments. To support these customers, CFIs should provide digital and highly personalized financial offerings that align with their ways of working. This could include opening a business account and applying for loans online, uploading documentation digitally, and chatting with customer support after business hours.
- Speed and agility. As opposed to weekly or monthly paychecks, companies often pay gig workers as they complete projects. This means gig workers generally require fast and flexible access to their earnings and need to be able to accept and transfer money quickly and seamlessly. CFIs can meet these needs by adopting instant payment services. The ways in which gig workers are paid also present an opportunity for CFIs to work more closely with companies contracting freelancers. For example, once the employer notifies them that a deposit is due, the CFI can provide the worker with early access to the funds.
- Flexible limits. Similarly, fixed monthly costs and unpredictable pay may put some gig workers at risk of overdrawing their accounts. Offering easy-access business accounts with no minimum balance and sufficient transaction limits, as well as overdraft protection, should allow CFIs to meet most gig workers’ needs and attract more of these customers. Some CFIs are also increasing the ways in which gig workers can deposit cash — for example, through cash registers at Walmart rather than in traditional branches.
- A “whole” service offering. Unlike full-time employees, self-employed workers are responsible for managing their income, expenses and taxes, securing benefits and insurance, and planning for retirement. CFIs can add value by providing a full range of financial services as well as tailored advice and education. This might include online services to assist freelancers with financial, tax, and retirement planning, or helping them to leverage their transactional data to manage their businesses more efficiently.
- Accessible financing. Freelancers and gig workers may struggle to access lines of credit or loans because they don’t tend to fit the standard borrower profile. However, there are many new methods — including artificial intelligence-driven ones — that CFIs can use to assess creditworthiness and detect default risks. Some FIs make alternate creditworthiness assessments based on rent, utilities, and cellphone bill payments, while others base lending decisions on future earnings for scheduled gigs, deducting payments as money is earned.
To meet gig workers’ lending needs, a CFI in NJ has implemented automated processes while also speeding up the decision process for small-dollar business lines and loans. The CFI also offers a line of small business credit cards that allows customers to leverage their personal credit history on their application.From attracting new customers and cross-selling relevant products to building loyalty and strengthening long-term existing relationships, the booming gig economy offers numerous opportunities to those CFIs willing to accommodate the needs of gig workers and those organizations that use their services.
