Gig Economy

Ingo Money CEO: Why Instant Payments Are Gig Work’s DNA

The gig economy has been getting no shortage of attention. In the last few years, a nearly uncountable number of articles and editorials have been written, exploring the concept of whether gig work is the future of labor.

The attention is not unwarranted — a fact confirmed by the PYMNTS Gig Economy Index. In Q2 2018, PYMNTS found 47 percent of gig workers had a regular nine-to-five job, a drop from 55 percent in Q1 2018. The same survey found that 33.8 percent of the U.S. workforce had participated in the gig economy, and a growing majority of these workers (75.7 percent) said they would not leave freelance work behind for a full-time job.

Gig work is estimated to generate $1.4 trillion in collected earnings over 2018.

However, Ingo Money CEO Drew Edwards told Karen Webster, gig workers aren’t just the future of the workforce — they have been an important part of its past. So, too, has their need for being paid as gigs are performed. Gig workers need that steady stream of cash flow — on demand — to pay their bills, which was something Edwards first observed when Ingo opened its doors in 2001 to innovate the check-cashing business.

“We had people coming in every day to cash a check and pay a bill,” Edwards said. “And I would ask, why don’t they do it like everyone else; why do they keep coming in?”

Edwards realized that many of the gig workers he was seeing were doing smaller jobs so their labor could be immediately converted into cash to pay a bill. For these workers, it was a matter of cutting a lawn to pay their cell phone bill that day, or installing dry wall and cashing their check to pay their rent.

Digital marketplaces, he noted, were the great leap forward for gig workers, making it possible for them to instantly turn their skills into jobs, instead of having to spend time searching them out. Today, 60 percent of gig workers have reported using digital marketplaces to find new opportunities, according to the PYMNTS figures.

The instantaneous ability to connect to work is only half the equation, though, when it comes to keeping the gig economy strong. The other half is instant payments: the ability to be paid for the work as soon as a worker has finished the task.

“If the work is now on demand, then the worker must also now be paid on demand — it’s got to be an on-demand equation from beginning to end,” Edwards said.

It’s a mindset that is sweeping through the gig economy like a tidal wave, he noted, and one that seems poised to spread beyond its borders.

A Question Of Cash Flow

When gig workers think about booking jobs, Edwards noted, they usually think about those jobs in fairly direct terms — the bill they intend to pay, or the purchase they plan to make, with the proceeds from their work. The immediacy of booking through a digital platform is important, but if that work is paid for on the standard biweekly schedule, the fit is incongruous with the freelance mentality.

“To do the work and go back home, and then wait to get paid next Saturday, is not the way these workers think. In the gig world, that offering means you won’t attract the driver, the web designer or the freelancer,” he said.

In the freelance world, for independent contractors, cash flow is everything — which is why instant payment services not only need to be available, but need to be ubiquitous and incredibly reliable.

“If a [gig worker] gets hooked on getting paid instantly, and they spend their Saturday doing work, only to find that on Sunday the funds deposited are not available for use (and that means that person’s phone could get turned off), that worker will never trust that service again,” Edwards explained. “Not getting paid on time is probably the single, most disruptive event in [a] worker’s life anywhere. The trust factor is everything when it comes to payroll, which means it has to be entirely reliable.”

When that is solved, and workers can book a job on Saturday afternoon that is linked intrinsically to hitting a button and getting paid for that work by Saturday night, it accelerates the pace of work in the gig marketplace because workers have more reason to work. It’s an outcome reflected in the data — according to the PYMNTS study, 84 percent of gig workers reported they would work more if they could be paid faster. It’s also observable in the real world, in other areas where instant push payments have gone online, such as lending.

“What we see … when you pair the ability to be approved for a loan instantly is that borrowers borrow more often, usually in smaller amounts,” he said.

The pull in the gig economy is similar. In much the same way that marketplaces allow workers the freedom to design their work schedules around their needs, instant payments allow workers to customize their access to funds around their financial needs, instead of having to navigate their entire financial lives around bimonthly paydays.

The appeal of that, Edwards noted, is much wider than just the gig economy.

The Broader Reach

When looking at the “traditional” payroll economy for full-time workers, he said, it’s already possible to see the inroads that instant payments are making.

“People need their cash to flow when they need it, usually for a specific purpose — their car broke down or their tire is flat. That has driven a tremendous amount of high-interest, short-term lending in the past,” Edwards told Webster.

Under pressure by the competition from the gig economy, Edwards noted that the instant payments push is heading for the traditional economy of full-time workers and their payroll.

“I think we are heading to a place where you may work every day at a nine-to-five, but your payroll will be on demand to the extent you have earned it thus far,” he said.

In the longer term, Edwards believes the purview of instant payroll payments is headed toward a broader stance. Pushing funds through debit rails has been the most common and shortest route to offer, but in a world where digital wallets like PayPal are playing a larger role in consumers’ lives, solutions will need to take a wider view of the type of account into which they can instantly push funds.

The even bigger picture, Edwards added, will be for firms to identify other cash flow-related services that can be built out for workers, with instant payments as a starting ground.

Edwards said, “I see a day where gig marketplaces begin to make loans to their contractors against the services they haven’t provided yet.”

Similar to the way Square started with card processing services, and with that data set expanding into a suite of cash flow solutions (like merchant cash advances, equipment loans and point-of-sale [POS] financing), gig marketplaces have an opportunity as well. Marketplaces have a lot of data about their workers — they know how many jobs those workers book and their likely income, and they can use that data to “evolve into solving other forms of cash flow issues,” he explained.

What starts in the gig economy has a way of influencing the traditional economy, particularly if it works.

“Like always, the disruptors are in the gig economy, and the smokestack economy gets forced into innovation,” Edwards said.

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