Why Gig Workers Prefer PayPal Over Direct Deposit

In the latest Disbursements Tracker, PYMNTS looks at why a growing group of gig workers and freelancers would rather be paid via PayPal than direct deposit.

A growing group of Americans are eschewing traditional, full-time employment, but that doesn’t mean they’re leaving the workforce entirely. As a result, their payment, or disbursement, preferences are also changing.

According to the latest Gig Economy Index, more than one-third of the U.S. workforce relies on gig work for income — that is, opting for short-term, ad-hoc or freelance jobs, rather than full-time employment. For many gig workers, the decision to undertake this lifestyle stems from a desire to enjoy greater flexibility and control over their schedules, including the amount of work they take on and which assignments they are willing to accept.

These workers  many of whom derive more than 40 percent of their annual income from this type of work  don’t just want control over when, where and for whom they work. They want control over their payments, too. PYMNTS researchers found that 85 percent of gig workers want to be paid faster, and would take on more gig work if they received their funds quickly.

Workers also want a say in how they receive those funds. PYMNTS research found that 51 percent of full-time gig workers prefer to be paid via PayPal, which outranked all other forms of payment, including direct deposit.

The Ubiquity (And Certainty) Of PayPal

As PYMNTS’ Karen Webster noted in a recent column, the major reasons gig workers opt to be paid via PayPal is due to its ease of use and widespread access. Some gig workers may not understand how peer-to-peer (P2P) payment services like Zelle and Venmo work, particularly those who don’t have an account at a large bank, or have a bank account at all. However, the same can’t be said of PayPal.

At least 250 million people worldwide have PayPal accounts, meaning that many are familiar with how it operates. The service also works the same way for all users, no matter what banks or financial institutions (FIs) they do business with, making it less likely for a gig worker to struggle with accepting payments.

This widespread access and ease of use provides certainty for gig workers, Webster pointed out. They often don’t have time to track whether a payment made via a P2P service will reach their accounts as intended — they want their payment to be guaranteed when they accept a gig and deliver their work as expected.

Though many may think of apps like Zelle as ubiquitous, that really isn’t the case, according to Webster. There are still 13,198 U.S. banks that have yet to connect to the Zelle network, meaning that many businesses  especially those that do business with small, local and regional banks  do not have access to it. Until that changes, it’s likely that the preference for PayPal will remain.

A Matter Of Cost

PayPal doesn’t just offer gig workers increased certainty over when and how payments will reach their accounts. It’s also cheaper.

Take, for example, a gig worker owed $800 for a completed assignment. If this worker is paid via wire transfer, they will encounter a long list of fees for the transaction. FIs often charge flat fees (typically around $20) for sending money in this manner, plus processing fees, meaning it could cost more than $30 to send an $800 payment via wire transfer — roughly 4 percent of the total payment.

PayPal, on the other hand, charges senders nothing if they have a bank account linked to their PayPal account, or if they send funds directly from their existing PayPal balance. Recipients are charged a 2.9 percent fee and a base charge of 30 cents for each transaction, meaning the $800 payment would incur a total charge of $8.50.

While that may not be a huge difference, it represents a transaction cost greater than 1 percent, which can be a significant amount for a gig worker.

Direct Deposit’s Rebuttal

It’s important to note that there are cases where gig workers may be better off paid via direct deposit. For example, if the sender and recipient do business with the same bank, transfers are typically free, meaning direct deposit may be more cost effective. The monetary amount of the payment also makes a sizable impact on which payment method would be most effective.

While standard bank fees mean that smaller payments (such as the aforementioned $800) are cheaper to make via PayPal, the same cannot be said for large transfers. With flat fees of $20 and $12 for senders and receivers, respectively, it becomes cheaper to send any amount over $1,093.10 via wire transfer, as PayPal’s fees would then exceed the $32 charged by banks.

It’s likely more cost-effective for workers outside the U.S. to be paid via bank transfers as well. Foreign workers must often pay fees to convert their funds from U.S. dollars to their local currency. What’s more, they usually have to wait longer for the funds to become available, which is a frustration for gig workers in any country.

As workers leave the world of nine-to-five employment in search of increased control over their professional lives, they would be well-served to exercise that same control over how they’re paid, ensuring income is received as quickly and efficiently as possible.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.