This erosion tends to be more prevalent in the gig economy, a space which sees freelance workers dependent on employers following through on their payment obligations to make their financial ends meet. To ease many gig workers’ anxieties, some companies are turning to digital escrow solutions to ensure assignments are completed and workers are quickly and efficiently paid their agreed-upon earnings.
Recent data indicates this type of solution would be welcomed in the industry. According to the most recent Gig Economy Index™, 84 percent of surveyed freelancers reported they would do more gig work if they were paid faster. The Index found that payments are hardly speeding up, however. Forty percent of gig workers were paid within a week of their services in Q2 2017, down from 46 percent the previous quarter.
These statistics indicate gig workers feel current payments speeds have room for improvement, but even those who had to wait an entire month for compensation may count themselves lucky. A separate survey from PayPal indicates gig workers also struggle with not being paid at all. Fifty-eight percent of the 11,000 surveyed reported not getting paid for their services.
The effects of such non-payment can be far-reaching, too. Not only does it destabilize gig workers’ finances, but it can also sour relationships between them and employers and discourage future participation in the freelance market. These are problems with which Denise Muyco, CEO of cloud-based content creation platform StratusCore, is all too familiar.
Non-payment problems are common for freelance and gig workers who operate in the digital content creation space, from software development experts to video game designers and beyond. StratusCore recently added an escrow solution to its platform to ensure freelance content creators are quickly compensated, offering them access to software solutions like visual effects tools from providers like Adobe and Autodesk for a monthly fee.
Muyco recently spoke with PYMNTS about the inspiration behind the escrow solution and how it helps freelancers get paid more quickly, and improves relationships between those employed in creative markets and their employers.
Building a ‘trusted economy’ for creative professionals
Smaller companies and individuals need access to digital tools to stay competitive against larger creative studios. Even with affordable design tools available to help them produce their work, though, there is ultimately a strong need for payment tools that will help these professionals get paid once that work is completed. After all, payment frictions in the creative content market can arise between freelancers and employers due to misunderstandings about deliverables or if a payment is delayed after a digital asset is delivered, Muyco said.
“There’s this innate stress between the client and the content creators,” she explained.
Escrow services, which hold money independently from two parties until all terms are satisfied, could help alleviate some of the stress between freelancers and employers. StratusCore added a Digital Escrow service to its platform — which was built using blockchain technology — last year. With the service, employers and freelancers can agree to the terms of a project and the necessary benchmarks or milestones that must be met to ensure it is completed on time.
When an agreement is reached, an employer deposits the funds for the project into the StratusCore Digital Escrow account. Funds are disbursed from the escrow account directly into a freelancer’s preferred bank account once the necessary deliverables are met and the digital assets are uploaded to the platform. This occurs within one to two days after the employer digitally signs off on the delivered asset and the escrow funds are released.
The goal behind adding an escrow service to StratusCore’s platform was to build a “trusted economy” between creative freelancers and employers and offer greater transparency into the related hiring and payment process, Muyco said. Freelancers are more likely to feel confident that they will quickly receive their earnings upon seeing funds deposited into an escrow account — and less fearful that they will experience a non-payment situation. The real benefit is assurance that both parties will fulfill their obligations.
“That is something this industry has needed for a long time,” Muyco added.
More efficient payments, more confident freelancers
The content creation market is currently thriving, thanks to the growth of streaming video on demand (SVOD) and over the top (OTT) services. By some estimates, the SVOD/OTT market is projected to be worth as much as $108.6 billion by 2026.
As SVOD/OTT grows, it will rely heavily on content creators to stay competitive and deliver the products that result in long-term engagement, Muyco said. This trend indicates that demand for more efficient payment solutions is on track to increase as the market expands.
“[Companies] like Netflix and Hulu, they have just opened up this market in terms of wanting and needing content,” Muyco explained.
Content providers are adding power to the demand for greater assurance that they will get paid — and be paid on time — as they work to serve that need. Digital escrow solutions not only help freelancers get paid, but also encourage them to continue to participate in the creative content market.
“It brings a level of confidence to freelancers,” Muyco said.
Building a “trusted economy” is a necessary key component to keep the creative content market thriving, she added. If creative content producers are discouraged by their payment experiences, clients could risk alienating the talent they need.
“Those are real issues when content creators or any freelancer is trying to have a life — and have their livelihood not be always at risk,” Muyco said. “It’s really important for our industry, and any industry, to make sure they are getting paid for the work that they do.”
One of the most effective ways employers build trust is by following through on promises. Tools like digital escrow and push payments that enable fast and real-time disbursements to freelancers and contractors could go a long way to ensuring both parties deliver, and help establish a foundation of trust for future gig market collaborations.