The Rise of The Gig Economy: How Electronic Payments Can Help Pt. 1

The rise of on-demand workers, short-term jobs, temporary or seasonal work, and an influx of independent, migrant workers have given rise to the “Gig Economy.”

In the Gig Economy, companies bring on independent contractors and freelance workers instead of full-time employees. The explosive rise of peer-to-peer apps in a slew of markets ranging from travel, accommodation, caretaking, and food delivery has helped legitimize the gig worker. These workers choose where they work, create their own hours, and essentially operate as their own small businesses. The nature of work–and employment in general–has changed. As a result, this has opened up new opportunities and challenges for payment networks that must meet the needs of this new workforce.

According to PYMNTS’ 2018 Gig Economy Index, over 33 percent of US-based workers have participated in the gig economy. Experts predict that by 2020, 40 percent of American workers will be independent, up from 34 percent in 2016. By 2028, freelancers will make up more than 50 percent of the U.S. workforce.

Currently, the gig economy represents $2.7 trillion in annual disbursements. However, despite gig work being on-demand, only 17 percent of gig platforms pay in real time. Many gig workers experience expenses in real-time, and yet they often have to wait for weeks to get paid. Survey results from PYMNTS’ same Gig Economy Index reveal that only 51 percent of gig workers in Q4 2017 reported being paid within one week of providing their services. This is a 12 percent drop from Q3 2017 when 63 percent of gig workers reported receiving payments within a week of rendering services.

Did you know that there are over 350,000 temporary workers in Canada that still get paid by cheque?

Offering faster payments and helping freelancers and temporary workers avoid incurring work expenses would encourage more people to participate in the Gig Economy. The ability to make instant payments in real-time and avoid the time-consuming and expensive reimbursement process would be a huge boon for the industry. The Gig Economy Index found 84.5 percent of those surveyed would take on more gig work if they were paid faster.

Hiring gig workers instead of full-time employees, and improving the way they are paid, can be beneficial to employers, too. Hiring a short-term workforce means employers can save on costs such as full-time benefits like healthcare, as well as additional labor costs. The right payment tools can help forge stronger relationships with this growing employee group.

So what is the solution? Electronic payments, such as prepaid. In part two of our series on the Gig Economy, we show you why.