Brexit Aside, Europe Still Beckons For Gig Economy

No one quite knows how Brexit will shake out, and PSD2 threatens to dramatically change the payments landscape across Europe. Hyperwallet MD Aran Brown tells PYMNTS’ Karen Webster that, despite the regulatory uncertainty that has emerged over the past few years, the U.K. — and Europe in general — are still fertile grounds for the gig economy.

In the face of Brexit, the Second Payment Services Directive (PSD2) and a number of major elections that could spell significant changes across the continent (with ramifications well beyond FinTech and the banking sector), many of us are left to wonder: what lies in store for the burgeoning gig economy in Europe?

Though details of the United Kingdom’s withdrawal from the European Union have yet to be sussed out (passporting, worker relocation, among countless other details), one fact remains distinct: Even as barriers emerge, companies will continue to transact across international borders.

This is true broadly of business being done in Europe, but also for the gig economy in particular. London has become a sort of epicenter for the gig economy, where independent workers are increasingly sought out by large companies in high-skill sectors. Often, those freelancers are performing work for organizations based in France, Germany and other EU member states.

In an interview with PYMNTS’ Karen Webster, Aran Brown, who serves as Hyperwallet’s managing director in Europe and helped launch the company’s London office earlier this year, explained that — even with current and impending challenges — the momentum of the gig economy in Europe will be difficult to stop. Within the EU, freelance work could represent upwards of $40 billion in earning power as early as next year.

While the term “gig economy” often conjures images of Uber or Lyft drivers, Brown explained that freelance work is trending toward professional services. Large organizations are using gig marketplaces to fulfill the requirements of their current workloads, or to transition parts of their business models away from full-time positions and outsource tasks to contingent workers. According to Brown, gig platforms have emerged to satisfy this need.

“One of the things that you see — not just in Europe, but across all of the gig economy — is that marketplaces are now attracting professionals in careers like legal services, human resources and accounting,” said Brown. A major part of the appeal for companies is flexibility: with on-demand professional services, organizations can bring in additional support for specific projects without committing to a long-term hire, enabling them to more quickly respond to their fluctuating business requirements.

But there are other changes taking place in Europe. On the payments side of the equation, Brexit threatens to force the relocation of hundreds, even thousands, of workers in the financial sector within just a few short years, and PSD2 will have a major impact on the payments industry when it takes effect in January.

Under the new regulations, marketplaces that serve as intermediaries in transactions must obtain authorization as payment institutions (PIs) or electronic money institutions (EMIs). That means submitting a lengthy application and subjecting their business practices to additional layers of regulatory oversight.

In an example, Brown illustrated how PSD2 might alter the steps of a common consumer transaction, such as booking a vacation. Consider someone who goes online to reserve a two-week sojourn to Australia. At Christmas, the trip might cost £3,000. The acquirer takes funds from the consumer’s debit card and pays those funds to the online booking site. That site then holds those funds before transferring them to the hotel in Australia.

Under PSD2, the online booking site is not permitted to forward the consumer funds it holds to the hotel without using an authorized third party. As Brown explained, that]s where a payment services provider like Hyperwallet can help, noting that Hyperwallet has already obtained the EMI authorization it needs to function as an intermediary across Europe, with the ability to hold and distribute funds on behalf of a gig marketplace.

Hyperwallet provides several additional benefits for gig economy marketplaces, including optionality for the contingent worker. For one, payees can choose when and how they want to get paid. “It might be on a prepaid card. It might be a bank account. We also offer over 170 settlement currencies.” Brown explained. “With Hyperwallet, payees just have more control of their funds. Few providers in Europe — if any — have multiple payout methods for individuals consolidated on one platform like we do.”

The continent faces some of the most significant changes to its payments landscape in recent memory, but gig economy companies are determined to persevere. Working with financial technology companies like Hyperwallet, these marketplaces can reduce emergent regulatory barriers and continue to find success in Europe.