Independent workers, or those entering the gig economy, are continuing to grow. While working at a full-time job may still be the norm for a large number of the population, an estimated 70.4 million Americans were classified as gig workers in 2022. In fact, there are projections that 86.5 million will be working in the gig economy by 2027, making up over 50% of the total workforce in the U.S.

Whether these workers have gigs as their sole source of income, or working on the side in addition to a full-time job, it’s hard to ignore the potential in helping to serve the growing needs of this demographic. As one of the fastest growing segments of the workforce, solutions that offer a seamless experience for this demographic is key to gaining their loyalty.

Financial challenges faced by gig workers

Gig workers, for the most part, are satisfied with the freedom and earnings they have. For those in the trenches full time, many report making the switch because of the allure of work life balance, better pay and more autonomy over their work. For those with a full-time job, the extra income would no doubt come in useful.

Despite overall job satisfaction, there are some significant challenges faced by gig workers, such as unpredictable income, lack of benefits and difficulties in accessing traditional financial services. Since gig workers aren’t traditional employees with a regular salary, the lack of a stable, recurring paycheck makes it difficult for lenders to verify and assess income.

For instance, acquiring a pay stub or 1099 as proof of income creates issues as payouts differ from week to week and annual documents are frequently out of date. As a result, gig workers — who don't fit into these traditional labor models and lifestyles — are left behind. Those who need some form of safety net until their next paycheck arrives won’t be able to access loans that truly reflect their earnings potential. Instead, many may have to rely on predatory loan products like payday loans. On top of the challenges in financial accessibility, gig workers often have difficulty understanding and tracking their own income as it comes in from multiple sources at different times.

Democratizing financial access for gig workers

The number of gig workers will only continue to grow. More than ever, it’s crucial to tap into more equitable practices that can truly serve gig workers’ needs, whether it’s to anticipate their financial needs ahead of time, or reducing friction when it comes to approving loan applications. Doing so can open up opportunities for customer loyalty, especially as democratizing access to financial products means a better consumer experience and helps build word of mouth.

Some ways this can play out in real life include:

• Evaluating eligibility for loans through real-time income and payroll data: Though credit scoring is an accurate way to determine a borrower’s willingness to repay, it doesn’t necessarily reflect his/her ability to repay.. Looking at income and employment data can be just as important when determining a consumer’s risk to repay a loan. Instead of relying on a few or limited data points, financial institutions should look towards real-time and more comprehensive sets of data — even better if it connects directly to payroll providers or a gig workers’ employment platform— so that all income is accounted for when assessing an applicant’s eligibility. The ability to view gig workers' earnings across various platforms in real-time allows a lender to understand earnings trends and even know if shifts have been worked that same day. Payroll data is offering potential to better underwrite borrowers, mitigate fraud and open the door to better customer relationships.

• Relevant financial tools to increase engagement: The more gig workers engage with your platform, the more you'll be able to be able to offer relevant products and services. This in turn, can increase customer loyalty and build word of mouth. Encouraging this type of engagement means your business needs to offer tools that are valuable and worth using. For gig workers, it could mean an easy way to include their income data in one, easy to view dashboard. Or, budgeting tools that use real-time data from all income sources to anticipate financial needs, like taxes they may owe or determining how to best maximize income based on their historical earnings. Tools could also include methods to suggest amounts to set aside or save or even ways to automatically update payout destinations to your institution's account or card.

• Offering better funding support: Some gig workers may be living paycheck to paycheck or have lower income months where they may need to borrow small amounts to cover daily expenses. Offering alternatives like earned wage access or other forms of paycheck-linked lending allows gig workers to receive some financial breathing room. The benefits mean you reduce your risk as a lender and increase your chances of gaining customers by opening up access to lending products. Customers will love that your products offer the opportunity to lower their chances of getting caught in the debt cycle, compared to if they were to take out more predatory loans. 

Drive business growth by serving an emerging market

Considering what gig workers’ need and want is key to differentiating your products and services in an increasingly competitive market. By implementing relevant and up-to-date solutions, whether it’s better product features or democratizing access to lending products, financial institutions that do so can leverage new and existing customer relationships to the next level.