Gig Economy

Meeting The Payments Needs Of Cross-Border Gig Workers

Even before the pandemic upended the ways we live and work, the workforce itself was shifting, marked by the rapid expansion of the gig economy.

Now, with stubbornly high unemployment and a recession underway, more people are embracing project-based work to help supplement incomes — or even as a permanent career shift.

No matter the vertical — from food delivery to website content creation — gig economy workers want to be paid quickly, and via the payment instruments they prefer, especially when cross-border payments are thrown into the mix.

Access to funds in a streamlined and speedy manner is important in an age where, as PYMNTS found, as many as 60 percent of consumers live paycheck to paycheck.

Break that down a bit, and it turns out that 16 percent of gig workers live paycheck to paycheck with no savings.

In an interview with PYMNTS, Dana Nino, senior vice president for Growth and Partnerships at Nium, a global financial technology infrastructure platform, noted that online platforms have had to — and still must — pivot to meet the demands of gig economy workers for modernized payments.

“Only a small segment of the global gig economy workforce actually gets paid in an expedient amount of time,” she said, noting that only about 25 percent of those workers received payments within a week of providing their services.

“To make quick, seamless, secure payments in the globalized, fast-paced gig economy, the gig platforms really need to quickly overcome a couple of challenges,” she said.

Among those challenges: Not all cross-border payment services are well-equipped to address the needs of gig economy workers.

Many developing countries, said Nino, still see gaps in coverage (speaking geographically). In addition, the percentage of banked adults is much lower in those developing nations than is seen in developed economies. For example, in Mexico, roughly a third of individuals have access to bank accounts, compared to about 99 percent in the U.K. and Germany.

Generally speaking, cross-border payments are marked by inefficiencies, high costs (commissions), slow settlement speeds and a fragmented range of payment options that are limited when it comes to serving a diverse range of payment “endpoints” in gig workers’ possessions.

“Online service marketplaces act as payment intermediaries — basically they are really acting as an escrow service,” said Nino.

“So, they segment their payment processing models into consumer-to-business and business-to-consumer, but the intricacies of this process and this payment model, such as foreign exchange rates and banking regulations, really add lag time between the completion of gig work and when those workers are able to receive their payment,” noted Nino.

She added that in some cases, cross-border payment firms have tailored their efforts to the desire for mobile payments and other digitally focused offerings.

Nium has a solution that uses the company’s Send services to enable smaller transactions and payouts with fewer fees via a mobile app option for payouts to cards, wallets and bank accounts, and even a cash payout options in stores. This service can be combined with Nium’s Visa card issuance solution for even more payout options. In this way, Nium helps address varying and unique needs of freelance workers located in different parts of the world.

Also of increasing attractiveness to gig workers: real-time payment, described by Nino as an “excellent alternative” to the current bulky, slow payment processing methods that have marked gig economy transactions across the years. Given the intense competitiveness in the gig space, freelancers often compare payout timing and efficiency when deciding which platform to choose, and the faster the settlement time, the better.

Platforms must also address a range of know your customer (KYC) and regulatory requirements related to payments across borders. (Nium embeds fraud control and compliance measures across its platform at the point of onboarding.)

With a spate of recent funding rounds under its belt, Nium is targeting an expansion that will include tuck-in acquisitions internationally, with an eye on tech firms focused on local payment and issuance.

Looking ahead on the other side of the pandemic, Nino maintained that the shift toward freelancing and flexible payment options will be a permanent one. For payments specifically, she said, variety “is a critical factor because a lot of gig workers don't have a card that they can get paid to. Some of them don't have a bank account. Gig economy companies offering a robust variety of end-point options for payouts to emerging markets has become increasingly important.”

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NEW PYMNTS STUDY: ACCELERATING THE REAL-TIME PAYMENTS DEMAND CURVE – NOVEMBER 2020

About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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