Home IT Fintech for gig workers is the next big untapped market

Fintech for gig workers is the next big untapped market


What are the new developments on the market providing financial assistance to gig workers and what is the future of this niche

What’s a gig economy and who are the gig workers

There were simpler times once. People used to go to their work every morning singing “Nine to five”, getting their paycheck every month, and moving ranks within the same organization all the way to retirement. One could literally take his employment to the bank and get a loan.

But times have changed and now we are supposedly moving towards the gig economy. The concept and the term aren’t new but the tempo of cultural and economical change is fast: it all started with car-sharing apps and freelancing platforms and grew exponentially since the beginning of the pandemic. There are now many ways to work gigs without being a contractor or boheme and the change is more evident in urban areas. The market is relatively fresh and some aspects of it, like offering loans for gig workers, are uncharted waters.

According to Forbes magazine, the gig economy already contributes over $1 trillion to the US economy and attracts more people than before the pandemic. More people than ever are now working from home, choosing flexible hours, or taking up side hustles. They are called gig workers and areas of their employment are vast: from traditional artsy freelancers to couriers and drivers.

The benefit for the economy is obvious. What about the benefits for the workers themselves? Here some controversy is to be expected.

The whole concept of the gig economy revolves around the “it’s every man food himself” principle. It’s basically a hybrid model between being employed and self-employed. The perks would be making your own schedule and avoiding the routine. While the downsides are all about missing stable employment and sometimes benefits. And this interferes with many not-that-obvious aspects of employment as an ability to take out a loan, for example.

What loans gig workers can apply for

When one applies for a loan with the bank, the lender runs a credit check and rules on the size and the possibility of a loan. Another important criterion is the existence of predictable employment status. In other words, a bank needs to know whether you can keep your work and your income for as long as necessary to pay back the loan.

Now, the reality has changed and more people are working flexible jobs every year. But the labor legislation does not move at the same pace and there are no specific criteria on how a gig worker may prove their employment to the authorities. So the bank just writes all the gig workers off as contractors leaving them without a good chance of getting a loan.

Other options are available to those who can present guarantors and put collateral, or to those who run a small legit business. But for the normal gig workers, the options are very limited.

Yet, even for them, there’s always a chance of getting a payday loan from direct lenders. This is the only niche in the financial sector open to change at the moment. Starting the Uber craze, payday loan lenders are trying to cover the immediate needs of anyone turned down by the traditional institutions. Over 12 million Americans take out payday loans every year and it speaks on traditional bank policies louder than words.

What are the application criteria and process?

The system of payday loans revolves around the accessibility of those to the general public with no collateral and no good credit score to show. So, the eligibility criteria for payday loans are more or less the same for everyone. One has to be an 18 and older permanent resident or citizen with a permanent address and valid checking account. From there on the only criteria not fully applicable to gig workers is a standard paycheck. And there is other proof of credibility the lenders are taking into account.

How can gig workers prove their income?

Because of a 2020 setback in gig economy growth, there were plenty of gig economy workers who felt the need for cash. Just think of Airbnb hosts, Uber drivers, and Etsy custom wig makers having a severe drop in their clientele, and these are only a fraction of the market.

Presumably, one needs a cash advance but does not have steady employment. How can they prove their income on the loan application form?

Direct lenders are taking into account gig workers:

  • Monthly bank statements proving you get paid regularly;
  • Forms W-2 or 1099;
  • Last year’s tax return;
  • Unemployment or disability benefits;
  • Pay stubs.

Any proof of income will be an advantage.

What to expect in the future

The speed with which the traditional banking institutions are moving is insufficient in modern reality. A huge market with the potential to cover the needs of every second American is acknowledged only by direct lenders who are trying to cater to the needs of a growing gig worker crowd.

No doubt, there is a future for any product aimed to finance gig workers and the first ones are the sites providing online payday loans even for those without stable employment. There are also other online services providing loans even to Avon sellers and AirBnB homeowners.

All the American gig workers just need to find their own ways or to patiently wait for the banks to change their policies.