The gig economy runs on tech-driven innovation. There has always been informal, short-term, contract-based work. But new platforms have enabled people from all walks of life to take part. In 2021, Pew Research broke the news that 16% of Americans have earned money through a “gig platform”. Online platforms and apps are expected to drive this trend forward in 2024 and beyond.
Additionally, financial apps, platforms, and digital services are being tailored to the unique needs of gig workers.
Let’s look into these trends.
The Role of Technology in Personal Finance
Technological advancements in financial apps extend to those specifically relying partially on gig income. Apps, platforms, and digital services are adapting to help gig workers:
- Manage income
- Handle their unique tax situation
- Find more work and make more money
- Manage their own insurance
- Invest
These services are being added as additional features to older financial platforms. But there are also newer apps and platforms dedicated specifically to gig workers. For example, platforms like Fiverr and InstaWork help gig workers find additional work.
There are also mobile apps like Catch that help gig workers find benefits, insurance, and retirement savings plans. Some traditional financial apps like Expensify have features to help gig workers. A good example is Expensify’s receipt tracking which helps gig workers prepare for tax season. It provides a broad overview of income and work expenses. It then directs users to consider relevant tax deductions and provides educational resources.
These features (or entire apps) help gig workers overcome their unique challenges.
Challenges Faced by Gig Workers
Tech solutions help gig workers face their most pressing unique challenges.
Income Instability
Irregular income is the first challenge that comes to mind. Most gig work does not entail a stable income paid bi-weekly. “Feast and famine” cycles are regular for many.
This instability requires careful tracking and money management. Saving when your income is higher can help prepare you for a bad month.
Some financial management apps and services make these tasks easier. The features they offer that help gig workers include:
- Tracking income
- Recording receipts automatically
- Compartmentalizing expenses (including deductible vs non-deductible expenses)
- Tax guidance
- More
Cross-border Payments & Money Transfers
Gig workers needing to make regular international payments have a disadvantage. Without guaranteed biweekly payments, it can be hard to automatically make bank transfers on a regular basis. Gig workers often lack access to such banking services.
These challenges can be overcome with financial technology (fintech) apps. Several international payment services offer competitive fees and exchange rates for international transfers. They may also offer multi-currency accounts and make partnerships with other gig economy platforms. Naturally, they must be built in a way that complies with financial laws in all the countries they operate in.
Lack of Traditional Employment Benefits
Health insurance coverage and retirement benefits are the main benefits gig workers may lack. Gig workers may open retirement accounts, but don’t have automatic contributions and employer contributions.
Financial apps and platforms can be used to find and manage the relevant financial accounts. Gig workers can open their own retirement savings accounts and opt into insurance plans.
Other traditionally guaranteed employee benefits that must be self-managed include:
- Paid time off
- Minimum wage and overtime
- Disability insurance, life insurance, and other insurance
- Investment accounts
International Money Transfer Services: A Closer Look
It’s important for gig workers who need access to international money transfers to consider their options. If you want to send money from your bank account internationally, you want an option that is:
- Affordable
- Reasonably fast
- Convenient
Money transfers can cost more than meets the eye. First, there are fees, which are direct and transparent. Then the transfer provider may charge their own exchange rate, which is a markup on the market rate. In some cases, banks may charge intermediary fees as well. You must consider all these expenses when determining which option is cheaper.
Often, the fastest money transfers are the most expensive. Some services will present multiple options. For example, you can get a one-day transfer for a large additional fee, or a 3-5 day transfer for the normal fee.
Despite this, you still have many options that strike a balance between speed, cost, and convenience.
Fortunately, technological updates in international money transfer apps make it possible to do this all from your phone. A few taps on a mobile device can see your transfer being sent to another country.
Comparative Analysis
The question remains: should I use a bank or a fintech service?
Overall, banks are further behind the curve when it comes to the gig economy and money transfers. Big banks normally offer high levels of security and trust, but charge high fees and are quite inflexible.
Easier to Use
By contrast, tech-driven solutions focus on ease of use. They are designed specifically with the needs of modern workers, including gig workers, in mind. They offer user-focused interfaces and features. The focus is on making it easy for you to send money where you need to send it when you need to send it. Their main advantage is that they make it easy for you to make repeat or multiple transfers once your account is set up.
Tech-driven financial platforms also normally integrate easily with your bank account. Some offer key integrations with popular gig economy platforms. This makes it especially easy to move money around. You can send money through an app, which automatically approves the transfer with your bank account. They debit you directly and facilitate the international transaction that you need.
Once your bank account is connected, it’s easier to use these tech-based solutions than it is to conduct a bank transfer.
Lower Fees
Ironically, using one of these third-party applications to pay from your bank account is often cheaper.
International bank transfers come with high standard rates. USD $30 to $40 is standard. Then, a intermediary bank may charge more for their service. However, you will normally get a favorable exchange rate with a slight markup.
With fintech platforms, there is more variation. However, most options charge far lower upfront costs. With the right choice, the total cost of exchange rate markups and fees will be significantly lower.
Conclusion
Right now, the evolving gig economy is well-served by a dynamic and competitive marketplace of financial apps, platforms, and services. Going forward, this is likely to only become truer.
