Serving Gig Workers’ Financial Needs

Credit unions have struggled with how to serve gig workers, one of the nation’s fastest-growing segments, in part because it’s difficult for credit unions to identify these workers in a sea of consumer accounts and therefore recognize their financial needs.

The Toronto, Canada-based Sensibill, however, has offered ways for credit unions to identify gig workers – the sole proprietors, freelancers and independent contractors who are often veiled behind member accounts – more accurately, and how to better serve them once found. And in today’s economic climate, they may need that service more than ever.

In October 2019, the Santa Clara, Calif.-based Upwork and New York City-based Freelancers Union released the results of “Freelancing in America: 2019,” which surveyed more than 6,000 U.S. workers over the age of 18. The survey estimated 57 million Americans freelance. Caitlin Pearce, executive director of the Freelancers Union, said, “More than one in three Americans are freelancing.”

The study revealed five notable findings about freelancers:

• Their income, at nearly $1 trillion (approaching 5% of U.S. GDP), exceeded the GDP of some major industries.
• Freelancing full time increased from 17% in 2014 to 28% in 2019.
• They most likely represented skilled professionals in areas such as programming, marketing, IT and business consulting.
• Forty-six percent of those surveyed agreed freelancing enables opportunities for those who otherwise might not be able to work.
• The younger the worker, the more likely they are to freelance – 29% of baby boomer workers, 31% of Gen X workers, 40% of millennial workers and 53% of Gen Z workers freelanced.

In partnership with credit unions and banks, Sensibill provides expense management services, which live within a financial institution’s online and mobile banking applications. Corey Gross, Sensibill’s CEO, suggested by digitizing receipt management, these sole proprietors can eliminate the hassle associated with paper receipts, more efficiently and conveniently complete taxes, and reconcile transactions and bill clients. The credit unions offering this tool can benefit from SKU-level data insight provided by the receipts, which enables them to more accurately identify member habits, behaviors and timely financial needs, and ultimately boost revenue opportunities and loyalty.

“We’ve been able get some information out of our work with credit unions to identify underserved segments,” Gross said. “What we didn’t know when we originally started working with financial institutions was a feature in our workflow allows customers to identify a transaction as being a personal or business expense.”

Sensibill noticed that close to a third of the transactions it was recording were tagged as business expenses. It then honed in on that data and realized many of the individuals conducting the transactions worked as sole proprietors. “We brought that awareness to financial institutions that higher segments of their customer base are probably not getting the commensurate level of service they might have taken advantage of in a small business banking account,” Gross noted. For example, giggers, who live in their personal accounts, usually manually separate individual and business expenses.

What Sensibill also saw was a steady rise of the underserved gig economy over time. Gross maintained, “By the end of 2023, probably 60% of the workforce in the U.S. will be gig workers. It is a powerful segment contributing upwards of a trillion dollars to the U.S. economy and something [financial institutions] ought to pay more attention to.”

Gross said credit unions can identify these gig workers more accurately by some obvious data flags – like who is paying them. “Uber or Airbnb depositing money – maybe not now, but obviously DoorDash and all the delivery services are still kind of up and running – are pretty clear markers, especially if they are habitual markers, of a gig worker.”

Other flags to look for among accountholder transactions are frequent business supply orders; gasoline refills (common for Uber and Lyft drivers); stops at home improvement stores for equipment or materials (for contractors); and purchases of Adobe Photoshop, Getty images or Shutterstock (for freelance graphic designers).

“We tend to see a certain pattern in their transactions that might indicate they’re of a particular segment of the gig economy,” Gross said. He pointed out these discoveries usually carry a lot of metadata with them as well: “We’re certainly part of a circle trying to augment the data with new alternative data sources that help with the identification of transactions as being a business expense or personal expense.”

Gross said Sensibill also extracts, structures and understands SKU level data from captured receipts and expenses. “The nature of those expenses is changing as people are purchasing more on digital channels than in brick and mortar stores.” One wrinkle within the current mined data is a blurring of gig workers with remote employees who are expensing home office supplies and are part of the salary workforce. “Right now, we’re kind of relying more on metadata that customers provide to differentiate one from the other very explicitly.”

In regard to the gig economy amid the coronavirus crisis and response, Gross indicated it is  clear that in general, the level of activity has fallen.

He noted in distressed times like this, people look to their financial institutions to help provide financial relief and solve pain points. “Whether it’s the COVID-19 crisis or just everyday activity, we believe things like cash flow management, receipt management and expense management eliminate hassles and headaches associated with expense tracking and reimbursables. This area, of course, has been particularly impactful for gig workers who largely would have to look for other solution providers, not financial institutions, to capture and manage this confidential business activity.”

Those gig workers do not necessarily want to share their confidential financial information, which financial institutions store and maintain, with a third party for similar data collection, storage and processing. “By providing these services, the credit unions themselves benefit from strengthening the relationship that comes from helping customers solve jobs to be done, but also, from all of this metadata and SKU level data,” Gross said, noting it allows credit unions to understand gig workers’ needs more deeply.

Historically, credit union technology could not adequately identify underserved segments like gig workers. Gross advised by leveraging metadata from purchase histories and classifying the purpose of the purchases, Sensibill creates much more in the way of micro segmentation and an understanding of individual brand preferences. “This has the effect of not just doing the things you would expect from any institution, which is cross-selling and upselling, but providing better financial education.”

Gross explained this is what some of Sensibill’s partners are already starting to do – they’re creating entirely new types of accounts to cater to those gig workers. “They might carry loan products that are beneficial specifically for people who are self-employed. They might carry personal financial management tools.”

Sensibill already partners with the Alterna Savings and Credit Union Limited (CA$8 billion, Toronto, Canada), fintechs such as NCR and FIS, and some other digital banking providers that serve a number of credit unions in the U.S.

Gross added Sensibill thinks beyond just receipts and expense management; it considers how it can help financial institutions better serve a customer base they did not recognize before.

Helping to provide freelancers and independent contractors with financial services specifically geared to them can be positive for all parties involved in a few ways. First, this underserved class of members and customers can get to learn about products and services made especially for them. Meanwhile, financial institutions can generate new revenue as well as fend off fintechs looking to attract those sole proprietors. “There are a lot of fintechs specifically targeting self-employed gig workers with financial solutions, services and products because their financial institutions are not currently offering it. [Financial institutions] making people aware that, ‘We know you exist’ and targeting them, prevents churn,” Gross said.

For credit unions, developing accounts dedicated to self-employed credit union members, plus using services like Sensibill and others, creates value-added extras that can be rolled into monthly service fees, Gross held. “It’s a way for them to incrementally add value while also using it as a sort of revenue generation mechanism.”

He added, “This is a particularly important time for credit unions to think about how they might be able to provide tools and services to their members in times of distress. Financial institutions now have more of a responsibility than ever to go beyond banking and beyond traditional financial services.”