Summary – The gig economy is growing. Gig workers are drawn to independence and flexibility. Payouts must be flexible and fast to retain advantage.
What is the Gig Economy
Independent work or freelancing is not a new trend. It has been around for a long time in a wide range of jobs. But in recent years a particular type of freelancing has really taken off.
The focus is on work that can be defined in small, well-defined units, or “gigs”. These are typically on-demand jobs, or jobs that are required occasionally, can be performed with a degree of flexibility of time and location, and are paid in small units of time or effort.
Examples of gigs include: designing a logo, writing an article, or translating it, posting to social media accounts, driving an Uber, or delivering food to your doorstep. Crucially, these gigs are bought and offered through online platforms, that facilitate the connection between the worker and the buyer of services, like Upwork, TaskRabbit, Uber, Doordash and many others.
This has come to be known as the “gig economy”, also sometimes called the “sharing economy”, and encompasses jobs performed for others but also asset sharing (renting out rooms on Airbnb, ride-sharing, etc.) and selling goods, usually small-scale ecommerce, particularly focused on artisanal products or crafts (selling on Etsy or Ebay).
A fast-growing market
According to a recent Mastercard/Kaiser Associates study, the global gig economy was worth $204B in 2018 and is projected to more than double to $455B in volume of work by 2023.
Gigs provide flexible earnings – they enable a person to complement their existing earnings from a full-time job for example, by earning from small jobs on the side that they can fit around their regular work schedule. But gigs are also increasingly the main source of earnings for many people, as they offer greater flexibility than a full-time job. One common characteristic of gigs is that they provide the opportunity to earn extra income when it is most needed.
According to a study by McKinsey, around half of gig economy workers do independent work to supplement their income, while the other half do it full-time as their main or only source of income. McKinsey also found that the vast majority of people surveyed did independent work by choice and were very satisfied with their choice, whereas around 30% were gig workers out of necessity (for example because their main income was insufficient or they were unable to find a permanent job).
Interestingly, the study by McKinsey also found that, contrary to common belief, independent workers are not majority millennials nor are they primarily low-income people doing one-off jobs to make ends meet. In fact, independent workers are well distributed across age groups and income levels.
The Future of the Gig Economy
Independent work provides workers with greater control and independence, greater flexibility and the ability to earn income when most needed, or simply when desired. These are important benefits that are driving an increasing number of people to choose independent work.
Online platforms that are now offering everything from design, to rides, to meals are feeding demand, as consumers and companies are presented with an ever increasing array of choices at the touch of a screen. The digital platforms that are facilitating the connection between worker and buyer of services are consequently growing rapidly – platforms such as Upwork, Airbnb, Uber, Etsy among many others.
According to McKinsey’s study, however, currently only a limited number of independent workers are working through online platforms, estimated at 15%. There is significant room for growth.
Many of these platforms are evolving to provide a range of useful services, such as review and feedback, contracts, billing, and of course payments. All of which are enabling the gig economy to become more efficient – buyers simply log on, select the offer, and purchase; sellers log on, bid or accept, and get to work, perform the service or provide the asset. Everything else is managed seamlessly by technology.
One of the most important drivers of the gig economy is its potential to enable workers to earn income when they want it. According to research commissioned by Visa, 54% of independent workers are drawn to independent work for this reason. 46% prioritise getting paid fast.
The research also shed light on independent workers’ financial needs: 77% indicated there are times when they urgently need money, while 72% will pick up extra gig work as a solution to this problem. Independent workers want flexible work with fast and reliable earnings.
“Mass payouts”, also called batch payouts, generally describes payments of small amounts to a large number of recipients at once. Online marketplaces and platforms process mass payouts to their providers at regular intervals, typically once or twice a month. Some offer payments after completion of the work, service or sale, but there is normally a delay of several days before the money is received. This is because of the complexity involved in verifying, processing and sending the money, particular when cross-border payments are involved.
Visa’s mass payouts solution, Visa Direct, enables companies to send funds over the Visa network to billions of debit and pre-paid cards worldwide in real-time. In most countries, funds can also be sent directly to a recipient’s bank account. Visa Direct removes the processing complexity and streamlines the payments operation, which allows companies to offer payouts directly to recipients in real-time and at scale.
Different online platforms for cross-border payments are also now enabling instant mass payouts. Most notably e-money services such as Payoneer, Transferwise and Revolut, that have similar appearance and functionality as a bank account, but are simply an interface to a prepaid account, sometimes based on Visa or Mastercard prepaid cards.
The Importance of Real-time Payouts
There is a clear trend toward quicker payment as independent workers favour receiving their money quickly and are ready to pay for the benefit. By offering the option of payments in real time, i.e. instantly after completion of the work, service or sale, solutions like Visa Direct may offer just the competitive advantage online platforms need to come out ahead.
Visa’s research points out that 66% of independent workers would select gig companies who offer real-time payments over others who don’t; and 70% would work additional shifts for quick money when needed if they can be paid real-time.
Just as gigs can be performed almost anywhere and anytime, so too should their corresponding payments be processed almost anywhere and anytime. Why should independent workers be tied to pay cycles if their work isn’t?
As the gig economy grows in volume and value globally over the next decade, it will be the companies that quickly adapt to the evolving needs of the market that will emerge the leaders in this new reality.
Pri-Num is a Visa Direct Solution Provider. Talk to us to explore how Visa Direct can help deliver better payment experiences to recipients and streamline and simplify payment operations for companies.