08/04/2022

Rising from the ashes of the pandemic, a new approach to the workforce was born. A familiar post-pandemic phenomenon coined The Great Resignation explains that a large percentage of the workforce took an introspective look at their work/life fit and decided the traditional path no longer met their personal needs. As a result, the gig economy emerged. The gig economy is best defined as workers who undermine the rigidity of full-time roles and elect to pursue non-traditional, temporary, contract or freelance jobs that pay by the gig, like running an Etsy workshop, driving with Uber, or freelancing as a consultant.

Approximately one-fifth of the overall US labor force classified themselves as gig workers as of 2021; furthermore, it is predicted that 60% of the US workforce will be independent by 2027. Let’s face the facts, the gig economy is here to stay! When a large percentage of the population evolves, we must learn to evolve with it. Let’s take a look at three gig economy trends and why financial institutions should pay attention.

Gig Economy Trends:

1. Gig economy workers use technology to stay connected & to find their next gig. Here’s an overview of how the gig economy works:

  1. Workers and employers typically find each other using digital platforms
  2. Individual gigs make up a worker’s income
  3. Independent workers are responsible for their own taxes, retirement plans, and benefits

With that in mind, we see that the gig demographic is made up of tech-savvy entrepreneurs who are comfortable leaving the security of their traditional employment to pursue their passions and autonomy–no matter the financial risk to themselves. This generation of workers wants to conduct all aspects of their life online, whether it’s their business, banking, or lifestyle. As a result, financial services need to be convenient, quick, and intuitive to meet the needs of the consumers.

To attract and maintain loyalty with this demographic, financial institutions need to be equipped to offer user friendly mobile apps where gig workers can easily access services at their fingertips or on the go.

What now? The current state technology for some institutions involves some form of online portal where customers are able to see their accounts, deposit checks, and make investments. Depending on the respective service capabilities, developing a mobile strategy to transform this capability into an easy to use mobile app will allow institutions to win and keep the business of this demographic.

This generation of workers wants to conduct all aspects of their life online, whether it's their business, banking, or lifestyle. As a result, financial services need to be convenient, quick, and intuitive to meet the needs of the consumers.

2. Gig workers present a higher financial risk; but, financial institutions can gain market share in the industry by learning how to hedge and accept this risk to fill the gap left by traditional institutions.

Millennials make up the largest portion of independent workers as a direct result of this generation re-entering the workforce during the post-pandemic recession. Since the Covid-19 pandemic, there’s a continued trend where millennials and independent contractors are dealing with financial set-backs like inadequate financial knowledge or lack of credit history & collateral, making them a riskier investment.

To stay ahead of the shift in the industry, it is time for financial institutions to evolve. Banks may consider looking at alterative and innovative ways to assess where to provide credit and how to adapt an approach to account for gig workers. Institutions can leverage more robust data & analytics models to make educated decisions around how and when to accept this risk.

What now? Consider developing an alternative approach to assessing the risk associated to serving this community using data. For example, leveraging a tool or platform that aggregates income information and demographic data to predict a customer’s taxable income for the year has the potential to earn customer loyalty for years to come. Create a strategy around how to implement the right tools to support your approach.

3. Gig workers are looking for a one-stop shop to satisfy their financial service needs.

Predictions indicate that gig workers will outnumber traditional workers in the next ten years due to the benefits and flexibility offered for both independent workers and employers; however, independent workers should also expect to face unique challenges without the protection of traditional benefits, a predictable monthly income, retirement plans, and annual tax documents.

Service is rapidly overtaking product offerings as the primary criterion customers consider when choosing where to do business. To gain and maintain customer loyalty while also capitalizing on the many needs of gig workers, institutions should consider the pro’s and con’s of becoming a one-stop shop for their clients.

What now? With constantly evolving technology and service capabilities entering the market, it is important to develop a clear strategy around which service offerings and tools help meet strategic goals and reach the desired customer base.

To recap, with the large influx of gig workers entering the scene, financial institutions should evaluate their mobile, analytics, and service strategies to appeal to the growing workforce.

Do you have a question about how to get started? Connect with one of our consultants by filling out the form below.

By Alex Hill

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ABOUT THE AUTHOR

Alex Hill

Alex is a Senior Manager in our Dallas office with industry experience in financial services, healthcare, oil & gas, and electric utilities.

To stay ahead of the shift in the industry, it is time for financial institutions to evolve. Banks may consider looking at alterative and innovative ways to assess where to provide credit and how to adapt approach to account for gig workers.

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