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Banking with the Gig Economy

WeGoLook has identified the clear need for a third-party service provider to verify assets for loans, conduct pre-lease auto inspections, and notarize documents.

If you haven’t gotten on board with the gig economy yet, you’re behind the times. Simply put, the gig economy, otherwise known as the sharing economy, connects companies, employees, and consumers with each other through digital platforms.

The company provides the platform, the workers are compensated for short-term projects, and the consumers pay for these services. Uber, Airbnb, TaskRabbit, and WeGoLook may offer widely different gigs, but they all are delivered on-demand within a single app.

This is the gig economy.

In the gig economy age, we have shifted our views on employment, regulation, and economics. Progressive organizations have recognized the enduring impact of the gig economy and have striven to evolve to meet consumer demands.

Oddly enough, the institutions on which every gig worker ultimately relies have been the most reluctant to change – banks.

The Gig Economy and Banks

Approximately 162 million people in the United States and Europe, or 20-30% of the working-age population, engage in some form of independent work, according to Choice, necessity, and the gig economy, a recent report from the McKinsey Global Institute.

Of those independent workers, 30% do so exclusively by choice, 40% as a way to earn supplemental income, and the remaining 40% do so by necessity. While these workers may have different reasons for making a living with the gig economy, they have similar fundamental banking needs.

Unfortunately, gig economy workers just don’t quite fit in our current system of classifying workers as either employees or contractors. They don’t typically receive all the traditional benefits that employees get from their employers, but they aren’t necessarily contractors either.

To gain more access to helpful resources, many gig workers have begun to form unions. Intuit and H&R Block have expanded their tax advice for freelancers, and some gig platforms have started to offer benefits to their workers.

Several new fintech companies have risen to the challenge to meet these new demands by providing guidance on investing, budgeting, and saving in the gig economy – and they're quickly aiming to replace traditional banks.

Here's how traditional financial institutions are missing out on opportunities in the gig economy.

Lack of Flexible Payment Options

Uber and Lyft offer their workers options to cash out their earnings immediately, rather than waiting for the standard disbursements from the platforms.

Uber has also created its own Xchange Leasing program, which allows drivers to lease a car at a discount with the agreement that the monthly payment will be automatically withdrawn from their earnings.

While these programs seem beneficial on the surface, they could easily cause a conflict of interest for many gig workers.

By relying on the same institution to issue their paychecks and service their loans, workers may place themselves in a vulnerable position. Banks have a unique opportunity to serve as a third-party financial institution in this case by offering better consumer protection and lending guidance.

Banks Don’t Employ Gig Economy Services

Aside from failing to offer financial solutions to address the problems many gig workers face, many banks are also missing opportunities to partner with gig platforms to better serve this growing demographic.

For instance, let’s say that an Uber driver would rather not get an auto loan through her employer, and she decides to apply for one with a bank instead. If you’ve ever applied for an auto loan, you know full well how tedious and time consuming the process can be.

Especially if you're a non-traditional employee!

Since the process cannot be now be done electronically, the average applicant must make time to meet with a loan officer in person and/or manually print, complete, sign, notarize, and mail documents for review – and then wait days to get a response.

Many auto loan providers experience low conversion rates because the process is just downright inconvenient.

WeGoLook has identified the clear need for a third-party service provider in this case. When partnering on an auto loan application, WeGoLook works with banks to verify assets for loans, conduct pre-lease auto inspections, and notarize documents.

When a bank receives an application, the bank sends an order notification to WeGoLook. An agent from WeGoLook immediately calls the prospect to schedule an appointment at the person’s home, office, or another convenient location.

A local gig worker, or what WeGoLook calls 'Lookers,' will then print the required documents, meet with the client, take any necessary photos for a condition report, execute the documents, scan them with an app, and deliver the originals for shipping.

The bank can review the information collected almost immediately and issue an approval on the same day, generating a much higher conversion rate.

As large enterprise clients typically deal with multiple vendors in their supply chain, they are increasingly partnering with the gig economy to simplify service delivery. They can easily achieve this with the help of gig economy services like WeGoLook.

Final Thoughts

Although many banks have been slow to evolve along with shifting consumer demands, they still play a vital role and have time to adapt.

Banks have a unique opportunity to partner with innovative third-party companies to expand their services and cater to the unique niches that have arisen and will continue to emerge from the gig economy.

In an era of distrust in large corporations, increased reliance on digital services, and growth in the gig economy, traditional financial institutions must hop onboard the digital platform revolution.