Due to which the volume of digital payments for the gig economy will reach $ 1.2 trillion dollars

Original author: Karen Webster
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A smart entrepreneur dropped out of college, discovered unsatisfied demand in the market, and created a whole market segment.
He launched a platform aimed at meeting the growing demand for services through the skillful use of accumulated but unrealized resource as a supply. One of the competitive advantages of the service was a centralized payment platform, which the entrepreneur created to eliminate difficulties and obstacles in paying for the services of suppliers.
The implementation of the idea took about two years to a turning point. One day the service gained momentum. The entrepreneur's platform has grown to the level of a multi-billion dollar business and has created a whole industry, the size of which is already estimated at about half a trillion dollars.
The founder of the business we are talking about is not related to the major technological giants, although his story sounds familiar and very similar. His business also cannot be called high-tech, at least by modern standards.
The hero of this story is named William Russell Kelly , and his brainchild, who was born 72 years ago, is today known as Kelly Services and is a recruitment agency for short-term staff leasing (outstaffing).
Founded in 1946, Russell Kelly Office Service gave rise to the emergence of a modern platform that meets the needs of the gig economy here and now, although at that time no one used similar terminology to describe the model Kelly created. His company sent office workers to work in local businesses when they had a short-term need for this or that staff. Thus, a whole industry of 480 billion dollars was born and developed, known as outsourcing and personnel management.

The success of the gig economy: high professionalism, simple payment schemes

Like other business platforms, digital or otherwise, Kelly Services has grown due to the recruitment of a critical mass of qualified specialists of various kinds of activities. They could solve the problems of businesses that have temporary difficulties in recruiting. In the 1940s, these were mainly teams of professional administrators with suitable experience, capable of taking on any project at any time and performing the assigned tasks.
Today, gad employees with more technical skills are increasingly in demand: experienced and professional web developers, nurses, laboratory technicians, doctors, engineers, computer scientists, architects, security supervisors, and even financial directors and lawyers who can live and work from anywhere in the world.
Digital platforms and advances in software, communications and other technologies greatly simplify the recruitment of a critical mass of qualified personnel to work on extraordinary projects in the event of a shortage of workers in various areas. Such services are also in demand when it is economically unprofitable for companies to hire an employee on a permanent basis to solve highly specialized tasks.
Our index confirms this trend. According to our data, more than half (54%) of gig workers were hired not to fill the shortage of personnel, but to fill current gaps in knowledge or skills.
In this regard, the lack of such a model of payment for the services of modern employees, which would correspond to the capabilities of the digital age, became obvious.
According to statistics, only 18.4% of gig workers receive payment through the digital platform with which they were hired. For some professionals, this figure is generally less than 5 percent. According to forecasts, in 2018 gig workers will earn a total of $ 1.4 trillion on the respective platforms. This means that about $ 1.2 billion of this amount will remain in limbo until the moment when digital marketplaces manage to digitize and monetize the relevant transactions.

How the digital payments market for the gig economy can grow by $ 1.2 trillion dollars

The workers in the gig economy told us that they are now receiving payment in one of four ways: checks (40%), cash (39%), direct transfers to accounts (34%) or PayPal (32%). Debit cards (11%) are used infrequently, partly because this method of payment is not popular among performers.
The choice of a particular method in each case depends on who pays for the services.
Representatives of small and medium businesses use checks (52%), PayPal (38%), cash or direct transfers (37% for both methods).
Large organizations pay for gig-workers by direct transfers (45%), checks (43%) and PayPal (40%).
Ordinary consumers pay in cash (47%), checks (41%) and PayPal (37%).
Transfers to a debit card are occasionally used by government customers and large businesses.

But what is really interesting in this whole story

Just over 84% (84.3) of all hired workers reported that they are ready to do more work if they are paid more quickly.
That is, 35% of the total workforce in the market will be able to work more productively if the payment procedure is simplified. Here it is important to understand that people take on one-off orders and projects, as this is a convenient way to pay bills or save money for the future. Thus, workers provide up to 40% of their income.
The desire to get paid faster and more conveniently was consistently observed among all groups of respondents. Specialists with an annual household income of $ 150 thousand and $ 50 thousand were equally interested in being able to receive payment when they needed it and using the methods provided by the digital platform on which they got the job.
In most cases, these people receive checks for their work, hence the interest in expediting payment. Nevertheless, 70% of performers from this group also reported that they are satisfied with the current method of payment. This figure is an order of magnitude higher than that among average consumers, who in 96% of cases indicated that they could not bear to receive checks as a payment.
So where, then, is the desire to receive payment faster, if 70% of workers in the gig economy are satisfied with checks?
This is probably due to the fact that business often does not offer other options, and employees have to accept payment as it is. In addition, checks are the most common form among businesses from small to large when it comes to paying vendor services. And from the point of view of most companies, gig-workers services belong to the category of vendors.
Therefore, gig workers, like other vendors, receive payments from the accounting department, and not the human resources or payroll departments. The transfer of funds in this case is carried out on the basis of receipt of an invoice for payment, which starts an internal process that lasts from 30 to 60 days. As a result, the payment is credited to the contractor only when the company considers that the work was performed in accordance with the tasks assigned.
Many digital platforms that allow access to highly specialized gig workers are designed so that digital payments in them are possible only on credit cards or PayPal accounts and only on the basis of receiving an invoice for payment. Most large organizations do not make payments in these ways and may not want to adapt to such rules. Gig workers also do not want to receive payment in this form, especially when the amount in the account is several thousand dollars and a commission of 3% begins to play a tangible role.
Our study found that 39% of those gig workers who do not use digital marketplaces to search for deals reported that they are abandoning them because of the fear of high fees associated with payment processes on such platforms.

What's next?

Perhaps the gig economy has evolved in its present form thanks to the success of Uber and Lyft, digital platforms that provide drivers and passengers the opportunity to find each other in real time and discuss the details of the trip.
But we believe that it is precisely the combination of highly skilled labor and simple payment schemes that are characteristic of the gig economy that will increasingly contribute to its growth in the future.
To make this possible, several things have to happen.
  • First you need to provide companies with access to the marketplace of experienced and proven professionals. Russell Kelly Office Service in the past and Kelly Services today hires workers only after they are tested in accordance with certain requirements. And only after that they receive contracts for work in various projects in accordance with their abilities and experience.
    Modern marketplace gig-economy will have to make a lot of effort to achieve the required quantity and quality of an experienced workforce. They will need to check all applicants and provide a strict and objective rating system. This will allow companies to make sure that employees hired by them through such platforms will be able to cope well with the task.
  • Also, digital platforms should update and improve the remuneration system by developing a model that will eliminate existing difficulties for both parties.
    This task becomes more difficult given the fact that gig workers consider the current state of affairs to be satisfactory, and they are also afraid that they will have to pay part of their income for speeding up payments.
  • It is important for digital platforms to give gig employees the choice of their preferred payment method in order to abandon checks in the gig economy, where development is increasingly determined by the narrowing of specialization and the rising cost of human labor, as well as making payments based on invoices for payment. This means that services should be open to new business models that allow you to send digital payments in new, more convenient ways.
The marketplays that understand this, and the players in the field of digital payments, helping them to eliminate all the listed gaps, will be in a very advantageous position to extract profits from the potential trillionth growth of the gig economy that may occur in the near future.
And those who do not want to develop in this direction will regret their choice, especially when their more efficient colleagues begin to talk about new payment mechanisms as their competitive advantage.

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