The gig economy is a busy economy, with ripple effects across the payments landscape. Workers are working around the clock. Small businesses are handling customers on the phone while paying suppliers online and dreaming up catchy social media posts. And corporations are trying to effectively manage—and pay—gig workers in order to keep them around.
In this fast-paced, globalized landscape, payments haven’t always kept pace (even if the demand has been there). In the gig economy, the payment process is usually both slow and opaque: gig workers can wait weeks or months for paychecks and billers and bill payers lack knowledge of payment schedules and fees. And because financial institutions don’t have visibility into what payments are due and when, they haven’t been able to fill the gap.
Fortunately, things are changing.
“We’re in the early stages of faster and real-time payments,” notes Sarah Grotta, Director, Debit and Alternative Products at Mercator Advisory Group. “We’re starting to see faster payments catch on, specifically around payroll and payroll-like payments that we see in the gig economy.”
Chief among these faster payment platforms is Mastercard Send, which helps gig employers attract and retain workers who expect the same speed and efficiency in payments that they enjoy in the consumer realm.
But the big winner may be FI’s.
With real-time platforms like Send, banks and credit unions can be one-stop shops for personal and business transactions moving in multiple directions. For example, Send would enable personal banking customers to receive instant payments from employers with all these various transactions occurring within Send. Merchants would likewise be able to pay suppliers and receive payments for goods and services in one place.
“We’re providing customers with choice through a new, faster, secure, payment method,” explains Mastercard’s Silvana Hernandez, Senior Vice President, Product Management, North America Digital Payments.
WHAT’S EFFICIENT… IS WHAT’S SIMPLE
Developed with the gig economy in mind, Send harnesses debit accounts to direct funds to both card and non-card endpoints including bank accounts, mobile wallets and cash-out locations. Notably, Send exploits Mastercard’s time-tested processes and platforms for enhanced security, predictability and transparency.
“We’re using infrastructure that powers our commerce activity today, which has been in place for 50-plus years,” Hernandez says. “This infrastructure is proven in terms of security and has extended reach, and we’re leveraging a user experience that consumers are familiar with by working with debit cards.”
BENEFITS FOR CONSUMERS, WORKERS AND MERCHANTS
Fast and real-time payments have a direct effect on workers and the economy as a whole, with benefits across demographics, including:
Speed and Convenience: Payments arrive on a predetermined schedule for permanent employees, but gig workers don’t enjoy that kind of financial security. Gig workers who are actively managing cash flow in order to pay bills, dealing with financial emergencies and even paying suppliers benefit greatly from early and speedy payments. In fact, Send has already partnered with rideshare providers and the response from drivers, who can still choose to get paid via ACH, has been overwhelmingly positive. And employers benefit too, as 84% of gig workers would do more work if they were paid faster.
“The problem with slow ACH is that it takes 2-3 days,” explains Hernandez. “It also requires drivers to produce bank account information, and people don’t know that by heart and don’t have it handy. We can now allow workers to request payout on demand and to have payments deposited immediately into a debit account.”
Ease of Use & Efficiency: While most gig workers have traditionally received payments through check, cash, or slow ACH, these antiquated processes can be very cumbersome for the worker, as they do not offer the seamless, reliable payment processing that consumers would expect in today’s ever technology-driven world.
Send improves the customer experience by not only expediting the payment but doing so in a way that feels intuitive for the gig worker, resulting in an accurate, efficient, and transparent payment process. For a gig worker who relies on gigs as their main source of income, payment efficiency is critical – from the moment they submit their invoice to when the funds are pushed to their debit card.
Predictability: Billers and bill payers alike struggle to access payment information, including when payments will arrive and whether there will be associated fees. This becomes doubly challenging in cross-border situations. Effective real-time payment platforms, on the other hand, provide upfront costs and schedules. Plus, with Mastercard’s global ubiquity, payments are dependable, accessible, and fast. “This is important because of the globalization of the gig economy,” says Hernandez. “These workers need that transparency and speed.”
As for the wider economy, fast and real-time payments do what one thinks they would: they halt inefficiency in its tracks so that inefficiency doesn’t halt growth. In doing so, they set the stage for the next phase of the gig economy and the economy at large.
THE GIG ECONOMY… AND BEYOND
These new payment platforms may have been spurred on by the gig economy, but that doesn’t mean there aren’t economy-wide applications. “These concepts are advantageous outside the gig economy,” says Grotta. “The demands and advancements created to meet those demands will spill over and create pressure upon traditional models to innovate.”
The B2B space is one such area that the new payment platforms can impact. Small businesses are constantly managing cash flow. However, suppliers receiving payments through ACH have to wait 2 to 3 days to gain access to funds. As Hernandez notes, those 48 to 64 hours can be the difference between success and failure for small businesses.
And, just like consumers, merchants don’t need to visit multiple supplier sites to send payments. Merchants receive their rapid settlements, improving their cash flow—then get back to the business of running their businesses.
New payment platforms would also result in hourly workers being able have early access to their wages. “We’re partnering with Evolve Bank & Trust to enable Send in Branch Pay,” explains Hernadez. “Branch pay is an application that allows hourly workers to get access to their wages in advance and also has tools to improve budgeting and financial health. With Send, Branch customers can get these payments in real time”
But that’s not all. According to Grotta, we can add government and healthcare to the list of industries ripe for faster and real-time payments.
“Think about disbursements from a government entity,” she explains. “There are millions of checks being written to consumers for things like tax refunds and jury per diems, so government is certainly a tremendous market. And so is healthcare. Think about all the refunds and rebates that are coming from retailers and other merchants.”
In other words, in today’s economy fast and real-time payments are for everyone, everywhere. Says Hernandez, “Our value proposition is that anywhere you have cash, checks or slow ACH, there’s an opportunity to make the experience easier and faster.”
This is good news for FI’s and anyone else in the business of doing business. In a globalized gig economy, workers and merchants will want to partner with organizations that can provide a platform for secure, fast and real-time payments—in the gig economy and beyond.
