This April, The Fintech Times is focusing on all things embedded finance, the integration of financial services into non-financial products and services. As the space rapidly develops, we look to highlight the latest developments, initiatives and challenges embedded finance has to offer and overcome across the globe.
The gig economy sees workers paid for the ‘gigs’ they do, often via digital platforms, such as offering food delivery or taxi services – made highly popular by the likes of Uber, Deliveroo and Bolt. In this setup, workers are not paid a regular wage and instead receive the benefit of far more flexible working hours than a traditional job.
While the gig economy has flourished across the globe throughout the last 10 years, technological issues still persist, particularly when it comes to delayed payments. In these circumstances, embedded finance could potentially offer a significant opportunity to put an end to these types of difficulties.
To find out more, we asked industry leaders about the impact embedded finance is already having on the gig economy.
Enabling immediate access to earnings
Ben Goldin, founder and CEO of Plumery, a digital banking experience platform aiming to provide ‘true’ customer-centric banking, explains how embedded finance solutions are supporting underbanked gig workers.
“Embedded finance platforms have changed the way gig economy workers manage their finances, providing solutions to challenges that traditional banks often overlook. These platforms offer credits, even against future earnings, or immediate access to earnings, in that way improving freelancers’ and gig workers’ financial inclusion.
“Additionally, they provide a suite of tools, including wealth management and retirement saving options, comprehensive earnings analytics, or automated tax withholdings, which cater to the unique needs of underbanked gig workers, ultimately enhancing their overall financial well-being.”
A ‘game-changer’ for the gig economy
James Butland, VP of payment network and UK managing director at Mangopay, a payments company providing modular infrastructure technology for e-commerce platforms,
“Embedded finance is emerging as a game-changer for the gig economy. With its ability to simplify payment processes and enhance financial management, this approach facilitates more effective ways of working for freelancers. Its impact can already be seen through the streamlining of payments. Instead of waiting for traditional payment cycles for gig workers to access their earnings, they can now do so instantly, giving them greater ownership of their finances.
“Furthermore, embedded finance is also fuelling partnerships with gig economy platforms for a more seamless experience. Embedded finance allows you to integrate directly into these platforms and manage all necessary items, without leaving. Take for example partnering with a wallet-based infrastructure partner.
“Not only can e-wallets be a way to disseminate funds to workers securely, but they can also provide a foundation for marketplaces and platforms to capture additional revenue streams through wallet-facilitated transactions, which may have been previously limited by payment flows operating outside of the wallet infrastructure.”
Creating new revenue streams
Elliot Colquhoun, VP of information security and IT at Airwallex, the global payments and financial platform for modern businesses, explains how embedded finance solves issues for gig workers: “From enhancing the customer experience to creating new revenue streams for platforms, embedded finance has a massively positive impact on the gig economy.
“Embedded finance solves a lot of problems for gig workers who are globally distributed and don’t have a local bank account or are in need of instant payouts. With embedded finance tools, gig employers can issue a virtual or physical card and push funds programmatically and in real-time when a job is completed. Gig workers can then use the card to make payments immediately and instantly be reimbursed for any costs associated. Beyond improving access to wages for gig workers, embedded finance also enables platforms and marketplaces to create product and customer stickiness, increasing revenue, employee retention and overall engagement.
“According to Legion’s 2023: State of Hourly Workforce report, more than 62 per cent of hourly employees plan to leave their jobs within the next 12 months and 64 per cent of those surveyed plan to leave their current industries. With employee engagement and retention on the decline, it’s essential for business survival to embed financial products directly to ensure speedier payouts.
“For the vast majority of employees, receiving a paycheck at the end of a shift could make a world of difference for them, thus leading to higher retention. Creating a win-win situation for businesses and gig workers.”
Early payments for sellers and deferred payments for buyers
Malte Huffmann, co-founder and co-CEO of Mondu, a payment solution provider enabling B2B companies to grow quickly and safely, also discusses the different features and functionalities that embedded finance can help provide: “In the gig economy, organisations hire independent contractors and freelancers for short-term projects, and plenty of digital platforms and marketplaces match buyers and sellers.
“Offering embedded financial services (as well as contracting) is a huge advantage, simplifying the business relationship for both sides. It can be a major pull factor for such platforms looking to increase their user base.
“Adding early payment for sellers and, in parallel, deferred payment for the buyers through an embedded BNPL solution is a huge value addition that can also generate additional revenues for the platform itself, assuming a revenue share model.”
Offering tailored services
Michael Wallis-Brown, vice president and global head of mobile financial services at Sweden-based telecommunications firm Ericsson, adds: “Seamless digital banking is no longer an aspiration, but an expectation from both customers and workers alike.
“With the increasing need for integrated digital banking solutions, embedded finance platforms offer a convenient way for gig workers to manage their finances within a single interface, eliminating the disjointed or friction points associated with traditional banking processes – at the click of a button.
“In particular, embedded finance platforms cater to the unique needs of gig workers by offering tailored services instant payouts, flexible financial options, and enhanced financial security. These services address gaps left by traditional banks, ensuring that gig workers have access to timely payments and financial tools that suit their dynamic work schedules and income streams.
“Ultimately, embedded finance plays a crucial role in fostering financial inclusion by providing access to services that were previously inaccessible to many gig workers, especially those who are unbanked or underbanked. For example, services such as cash advances or micro-loans are difficult for the unbanked to access, as they lack the documentation or credit history required for authorization. By leveraging insights into users’ cash flows and repayment capabilities, embedded finance operators can extend financial services to individuals who may have been excluded, harbouring a new era of financial accessibility and empowerment of gig workers.”
Utilising machine learning
Finally, Eyal Moldovan, co-founder and CEO of 40Seas, a fintech platform for cross-border trade financing, explains how embedded finance is putting an end to delayed payments for gig workers.
“Embedded finance is reshaping the gig economy by streamlining payment processes and providing financial services tailored to freelancers and independent contractors. One of the biggest issues confronting workers in the gig economy is delayed payments.
“Embedded finance enables instant payouts and cash advances for these professionals, meaning they don’t need to wait for traditional pay cycles to access their hard-earned income.
“Machine learning algorithms can also analyse earnings patterns, tax regulations, and deductions, providing accurate tax estimations in real-time. This enables workers to manage their tax obligations more effectively, reducing financial stress and compliance risks.”
