How the Freelance Economy Will Give Rise to New Financial Services in 2017
2017 will continue the rise and dominance of fintech – often hailed as “the latest darling of venture communities worldwide”. In 2016, global investment in fintech companies hit an estimated $15 billion by Mid-August 2016. According to the Price Waterhouse Coopers Global Fintech Survey 2016, in the next 3-5 years, cumulative investments in fintech globally could well exceed $150 billion. The evidence is clear – the future of work is changing – Millennials want greater flexibility to be their own boss – to choose their own working hours and on-demand platforms such as Uber are helping to create that entrepreneurial lifestyle that Millennials seek.
Here are three ways the freelance economy will give rise to new financial services in 2017.
A Trend Towards More Recognition of the Incomes of Freelancers
The freelance economy will give rise to multiple start-ups in the area of new disruptive financial solutions for freelancers as traditional banks struggle to play “catch-up” in the gig economy. Fintech companies have been succeeding in areas where traditional institutions have failed like leveraging mobile applications for accessing financial services. Traditional banks tend to view the incomes of freelancers as unstable (i.e. a credit risk) and so freelancers struggle to qualify for traditional financial products (such as loans, mortgages, refinancing etc.) – often needing two consecutive years’ worth of financial statements and tax returns to qualify. As more and more financial services pop-up through start-ups that seek to provide solutions to this burgeoning market, traditional banks will have to refocus their products and adapt to suit freelancers.
The rise of new Payment Platforms
Star of Dragon’s Den Canada and Mentor at Aspire-Canada.com, Michelle Romanow is an expert in fintech. Michelle built the daily deal site Buytopia and mobile savings platform Snapsaves, later acquired by Groupon – and is now venturing in establishing a “bank for freelancers”, clearbanc.com, a financial services platform targeting North America’s 50 million freelancers and self-employed contractors. Clearbanc went live in the U.S. in April 2016 after striking a deal with Uber to provide revenue-based financing for all its drivers in the U.S. in the form of a Clearbanc branded debit card that they put all transactions through. Other Fintech firms that specialize in payments such as TransferWise (remittances), Stripe (payment gateways), and Mobikwik (mobile payments) all disrupted the financing industry in the early days.
Access to additional financial services
Freelancers will also require additional services such as accounting services, and tax planning. Freelancers often face difficulty in budgeting and knowing exactly how much to set-aside for their taxes each year. Imagine an all-in-one agile platform that managed all these various services in one solution? Freelancers can earn upwards of $100k per year, and need access, like traditional employees to a system that handles taxes, various deductions for retirement, access to insurance etc.
These trends will no doubt continue into 2018 and beyond as this segment of the market continues to grow.