FinTechEmpowering Gig Workers: How Fintech is Revolutionizing the Gig Economy

INTRODUCTION

Gig workers or freelancers are someone who takes on hourly or part-time jobs in such as in catering events, software development, food delivery, cab drivers, etc. The work is of temporary nature and completed during a specified time under a nonstandard work arrangement, and is different from a full-time employment scheme. Gig workers employment is completely different from the traditional employer-employee relationship.

The gig economy, also known as the “freelance economy”, is a work model in which people offer their services independently, often through digital platforms, instead of having traditional full-time jobs. With technological development, shifting workforce dynamics, and the growing desire for flexible work arrangements at the core of this economic shift, there are newer avenues for people to become their own bosses and follow varied career paths. Platforms such as Uber, Lyft, Upwork, and Fiverr have emerged to act as catalysts in connecting gig workers with clients worldwide.

While it brings in flexibility and autonomy, there are also many issues involved. Unstable income, lack of full-time employment benefits, lack of access to financial services, and a lack of job security. These are everyday challenges that fundamentally impact the financial well-being and basic quality of life of gig workers.

Using digital innovation, fintech firms are changing how gig workers take control over their finances, and secure financial credits. From income management tools to micro-investing and insurance solutions, fintech is driving a powerful movement in empowering gig workers and building a more equitable gig economy. The impact that FinTech has on gig workers may provide some useful lessons for the future of work and the construction of a more connected and thriving economic ecosystem.

FINTECH SOLUTIONS FOR GIG WORKER EMPOWERMENT

Fintech, the intersection of finance and technology, has emerged as a powerful tool for addressing the challenges faced by gig workers. By leveraging innovative solutions, fintech companies are empowering gig workers to take control of their financial well-being.

1. Income Management and Budgeting

• Expense Tracking: This way, gig economy workers can learn how much money they have generated and spent. This feature of the fintech applications can prove substantially useful in enabling users to gain insight into their spending patterns.
• Tax Preparation: The preparation of tax returns for gig workers could be made easier by apps specifically designed for gig workers.

2. Savings and Investments

• Micro-Investing: Enabling gig workers to invest a small amount of money at frequent intervals can build wealth over some time.
• Retirement Savings: Fintech solutions can provide retirement savings options that are suitable for gig workers.
• Financial Planning: Setting financial goals and creating personalized saving plans can help gig workers achieve their financial aspirations.

3. Access to Credit

• Alternative Credit Scoring: Applications can be made by the fintech companies where scoring can be used in respect to the number of alternative data sources, including but not limited to payment history on gig platforms.
• Peer-to-Peer Platforms: P2P lending and crowdfunding platforms have arisen as alternate funding sources for gig workers. These platforms connect borrowers with lenders directly, allowing them to get financing that would otherwise be difficult to obtain.
• Small Business Loans: The access to small business loans will enable the gig worker to invest in their own business or towards unexpected expenses.
• Invoice financing: Fintech platforms can provide financing based on unpaid invoices, improving cash flow for gig workers.

4. Insurance

• Gig Worker Insurance: Tailored insurance products, such as income protection, health insurance, and liability coverage, can protect gig workers from financial risks.
• On-Demand Insurance: Flexible insurance policies that can be adjusted based on work schedules can meet the needs of gig workers.

5. Financial Education

• Personalized Financial Advice: Fintech platforms can offer personalized financial advice based on individual circumstances and need of the gig workers.
• Financial Literacy Tools: Educational resources and calculators can help gig workers make informed financial decisions.

REGULATORY AND INSTITUTIONAL FRAMEWORK FOR FINTECH IN THE GIG ECONOMY

Gig work, being a relatively new form of workforce engagement, still remains untested in Indian judiciary, and with the absence of specific and dedicated legislations, gig work as a sector is often unorganized.

A Policy Brief Report by Niti Aayog on “India’s Booming Gig and Platform Economy – Perspectives and Recommendations on the Future of Work released on June, 2022” provides a comprehensive view on the state of gig workers in India.

The report highlights booming gig economy and rising job opportunities for gig workers. The report found that 31% of gig jobs are low-skilled, 47% medium-skilled, and 22% high-skilled. Since person working in fintech sector must be skilled person, it can be deduced that only a fifth of gig workers are working in sectors like fintech.

The report also recommends leveraging fintech and such similar platforms to provide cash flow-based loans to gig workers instead of collateral-based loans. It also suggests classifying unsecured loans to first-time borrowers in the gig economy as ‘Priority Sector Lending’ to enhance access to credit.

AMLEGALS REMARKS
In the gig economy, unprecedented flexibility is present, but it has a new set of financial problems for its workforce. The combined income instability, lack of access to benefits, and restricted access to traditional financial services only perpetuate the lack of financial well-being for the gig worker. At the same time, fintech has been a game-changer. It provides new, innovative solutions relevant to the gig economy and therefore helps workers do so efficiently, besides giving them access to credit and endangering financial resilience.

Fintech as a sector is also providing solutions, from income management tools and micro-investing platforms to insurance solutions and financial education resources. In fact, it is highly possible that with the evolution of the gig economy, role of fintech will further increase and would be very important for gig workers.

The potential of fintech to disrupt the gig economy remains immense, despite regulatory hurdles and gaps in digital literacy. In catering to the financial needs of gig workers, fintech is not only giving power to the people, but also around economic growth and stability.

– Team AMLEGALS assisted by Mr. Mehul Agarwal (Intern)

For any queries or feedback, please feel free to connect to mridusha.guha@amlegals.com or liza.vanjani@amlegals.com