Gig Economy

Deep Dive: Catching Up On The Freelance Payment Curve

No freelancer appreciates delayed payments, which can destabilize their financial health. The flexibility that enables freelancers to work with the companies they choose also allows them to leave if they hit payments-related speed bumps.

Freelancers contribute more than $1 trillion to the American economy alone, and their freedom represents a challenge for businesses that have not yet tailored their payment processes to the gig economy. Small to mid-sized businesses (SMBs) are especially vulnerable, as they already compete against larger companies for relationships with freelancers. Late or delayed payments could send potential workers to larger marketplaces that offer better benefits.

SMBs currently outclassed by competitors’ payment innovations will need to catch up quickly. Such entities cannot just grab any digital payment solution they find, either, as ad hoc workers have specific payment needs to address — simply providing automated clearing house (ACH) or direct deposit services will no longer cut it. SMBs must carefully identify their freelancers’ desired features, as well as how to best provide them without overburdening themselves. Integrating the wrong payment methods can be just as harmful to freelancer loyalty as outdated payment processes.

Confronting Ad Hoc Landscape Changes  

Estimates of the freelance market’s size vary: Some reports project that 43 percent of the U.S. workforce will perform gig work by the end of 2020, for example, while others predict lower numbers. One study found that 75 percent of workers prefer freelancing to full-time work, but this preference underscores their serious financial concerns. Late payments will more negatively impact freelancers committed to the ad hoc market, and gig economy participants getting a handle on new regulations are bound to be even more concerned over their financial statuses.

Payment processes that assuage these fears are essential for companies working with skilled freelancers. Ad hoc workers desire wage advances, as well as access to flexible funds, instant payments and mobile solutions. Companies accustomed to paying freelancers via paper-based invoices and checks must pivot to faster digital disbursements.

Firms must also consider where remote freelancers are working. Gig workers might expect payments in alternate currencies or have entirely different payment behaviors, such as relying on payments that connect to other online platforms. U.S. workers are comfortable with accepting ACH transfers or solutions that link directly to their bank accounts, for instance, while those in other countries may prefer payment methods that do not need accounts at all — 38 percent of adults worldwide are unbanked and, therefore, must receive payments that do not require bank accounts.

Other freelancers may even be looking to eschew those traditional digital payments. U.K. freelancers lose about 10 percent of their incomes to transaction fees associated with credit card payments. Those individuals are likely to prefer payouts that do not rely on such cards. Mobile wallet solutions could provide benefits to like-minded workers, as these payment types do not need to connect to bank accounts. Venmo, for example, does not require users to link to such accounts, and often forgoes fees for certain transactions.

Getting Ahead Of The Curve For Freelancers 

The changing freelancer landscape represents an opportunity for companies moving to digital payments. A lack of trust is illustrated by the 87 percent of freelancers who feel as though lawmakers do not know enough to properly regulate the industry. Marketplaces able to provide quick payments and features, such as financial insights, could earn that needed trust.

Firms looking to keep pace with their competitors have three essential steps to follow when seeking to pay freelancers promptly, and in a satisfactory manner: They must entice freelancers to work with them, onboard workers to their platforms and pay out fees through methods that support some of the aforementioned payment types. Gaining self-employed workers’ trust often involves demonstrating support throughout the relationship, which means everything from onboarding to the eventual payment process must be seamless.

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PYMNTS LIVE VIRTUAL PANEL: WHY SWIFT GPI IS JUST THE BEGINNING 

On Tuesday, March 31, 2020 at 9:00 AM (ET) join PYMNTS CEO Karen Webster and panelists Vincent Kilcoyne and Roland Brandli of SmartStream for an in-depth discussion on the need to use transformative digital strategies to remain relevant in today’s challenging financial landscape. The discussion will cover strategies that will allow clients to improve operational control, reduce costs, build new revenue streams, mitigate risk and comply accurately with regulation.

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