The gig economy is dynamic and constantly changing. Since the onset of the Coronavirus pandemic, the sector has expanded exponentially in response to society’s growing reliance on gig workers to deliver the bare necessities, straight to consumers’ doors.
Office workers, used to the 9-5 grind, suddenly found themselves furloughed or laid off entirely, resulting in increased dependence on gig work to make ends meet in an unprecedented time.
An estimated 5 million Britons work within the gig economy, meaning there are now more gig workers than ever. Yet the unpredictable nature of their income complicates their financial lives. Historically, high-street banks have avoided catering to gig workers, perceiving them as risky customers.
COVID-19 and its impact on the economy have thrust the disproportionate financial struggles faced by gig workers into the spotlight. There is increasing recognition of their unique financial needs and the failure of the current system to meet them.
While digital platforms continue to accelerate the popularity and profitability of the gig economy, huge rifts between the industry and the financial health of its workers remain.
This has led to ample opportunities for FinTechs to provide solutions for gig workers. The embedded financial services model in particular accommodates gig economy workers with fluctuating incomes, offering an efficient alternative to traditional banking. Thus, gig workers are empowered to achieve financial independence, with personal eMoney accounts that afford a range of functionalities including instant access to wages, bill payment and money transfers, and more.
What are embedded financial services?
Embedded financial services are defined as financial services that have been installed into non-financial platforms to create a more efficient and intuitive customer experience.
In our modern-day lives, embedded financial services power some of our favourite offerings, from taxis to takeaways, and are creating exciting new opportunities in every industry for innovative companies, willing to go the extra mile.
Embedded financial services are not to be confused with embedded finance which technically refers to credit. The term embedded financial services has come to encompass all forms of financial solutions.
💬 Good to know: While Modulr works with marketplaces that offer credit, those marketplaces do so under their own credit licence while Modulr only performs the operational payments side of the lending process including disbursements and collections. This is because we're an infrastructural payments platform and obtaining credit permissions, such as a banking licence, is not currently a part of our business model.
How can embedded financial services meet the needs of those working in the gig economy?
- By embedding financial services, companies based on the gig economy model can remove expensive middlemen (such as card networks and pricy payment processes), making financial solutions much cheaper on average for gig workers.
- Embedded payments can deliver 24-7 payments flexibility, ideal for an agile workforce.
- Companies can offer gig economy workers the convenience of prepaid cards and immediate access to their earnings, without waiting for financial intermediaries to settle accounts.
- Embedded financial solutions have quick onboarding and development, meaning gig workers can begin to use their innovative services immediately.
- Ridesharing companies, such as Uber, can offer various financial products (such as debit cards, digital wallets and instant payouts) benefitting both drivers and customers.