How Fintech Serves Workers in the Gig Economy
It’s the end of the month, but your pay is lower and the bills are still due.
This scenario is all too familiar to the many hourly paid employees, freelancers, on-demand workers, and others who are faced with a high-stakes juggling act: what they’re doing – which can vary as much as the weather. week to week – with what they owe.
Yet a small but growing number of fintech companies have responded to the changing workforce with solutions designed to help them manage the ups and downs of their money at a time when most Americans do. do not have enough savings to cover an emergency of $ 1,000.
Some, like Figure and Chime, automate savings deposits to help all kinds of people build an emergency fund and beyond. Others, like Same, Earnin and Instant Financial are redesigning the payroll schedule to give people an alternative, such as taking out a payday loan or being plagued by overdraft fees.
Today, a new fintech company, Steady, launched an app for those seeking financial stability. But rather than increasing the frequency of paydays or transferring money to another account, Steady aims to help the group of gig workers, part-time entrepreneurs and others find more sources. of income at a time when wages stagnate and employers are reducing hours.
“Everyone faces the challenge of needing additional income,” says Adam Roseman, CEO and co-founder of Steady.
In early August, the startup announced that it had appointed NBA legend Shaquille O’Neal as an advisor and raised $ 9 million in Series A funding which he will use to help solve this financial challenge.
What Steady offers
Steady promotes itself as “The Revenue Creation Platform for Build-Your-Own Workforce”. So, on the app, people can find employment opportunities, such as pet sitting, driving for Postmates, and part-time work in retail and hospitality. The concerts that appear are personalized based on user preferences, such as how far they want to go and at what times. The app also allows users to link their bank details, so Steady can track their earnings across multiple jobs.
“The traditional 9 to 5 career path doesn’t work for everyone, and more and more people are starting to make their own way,” said Shaquille O’Neal. in a press release announcing Steady funding. “Steady sees and serves this group, giving them the tools to discover new employment opportunities and the resources to make more money and take control.”
There are serious concerns about what people may lose by working, such as health benefits and pensions. But a JPMorgan Chase institute research paper says platform jobs can help people increase their income when needed. As the report says, “This is a potentially much better option for mitigating or overcoming volatility if the alternatives are to limit spending, take on additional (potentially high cost) credit, or become delinquent on existing loans.” . “
A whole new world of work
Steady won’t be the last fintech company trying to revamp the flexible worker experience. Fintech Cogni, for example, is preparing to launch a mobile banking experience designed for those working in the odd-job economy.
The attraction for fintech companies is a growing market.
Mary Meeker, partner of Kleiner Perkins Caufield & Byers, said in her 2018 Internet Trends Report that freelance work is growing three times faster than the growth of the total workforce. According to Intuit estimates, concert workers represent 43 percent of the workforce by 2020.
Stephen Greer, senior analyst at research and consulting firm Celent, explains that these people need personalized tools because of what they face: infrequent or unstable income streams and, as a result, less visibility. on their cash flow. “It requires a new level of financial management,” says Greer.
While some prefer flexible work, the question marks around paycheck amounts are not welcomed by everyone.
“They want consistency,” says Kristen Berman, co-founder and director of the Common Cents Lab, part of the Center for Advanced Hindsight at Duke University.
According to a study by Common Cents, people would give up $ 9,900 of their annual income to move on to a consistent job with a reliable salary.
They solve a need. But do you have to register?
While fintech apps for those with volatile incomes are young, they already have some traction.
The Even app, which is a money management and payday advance app, has been available to Walmart employees since December. In July, the retailer announced that 200,000 Walmart employees were already using the app. And Even is about to grow as he recently closed a $ 40 million Series B round of funding.
Although Steady is younger, over 100,000 people have already downloaded the app. So far, Roseman says most users are between the ages of 35 and 45 and have a financial obligation, like a child or a student loan, resulting in the need for additional income.
Whether you should join the user group to help you deal with the inconsistent amount of money coming in, of course, depends on your financial needs and what the app offers.
If you’re trying to take your kids on vacation or fix a flat tire, breakdown apps can help. But be careful of the fees required to get the benefits. Earning, for example, lets you decide what to pay to unlock portions of money you’ve already earned. The price for naming your salary via the Even app depends on the amount covered by the employer.
Monitoring usage is also important. While Berman sees increasing the frequency of breakdowns as a good alternative to a payday loan, she worries that people are abusing the benefit to the point that they should do more math on what. they could afford on any given day. “A lot more research needs to be done,” she says.
And, of course, for some it’s about making more money. Same 49% of Mint.com users spend more than they do. For this group, Steady might be the best option.
“There is not enough income for a large population,” says Roseman.