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An Underserved Segment Neobanks Are Eyeing: The Gig Economy

“Gig” – when’s the last time you heard someone use that word? Or perhaps you used it yourself, recently. Admittedly, it is increasingly common for people these days to say they got themselves a ‘gig,’ and the chances are, you know someone who has one. But did you know the origin of the term goes back to the 1920s? Coined by jazz musicians of that era, the term gig was originally slang for a live musical performance – a contraction of the word ‘engagement.’

The ‘gig economy,’ however, is a relatively new term which was created to reflect the working habits and tendencies of what we know as the ‘millennial’ generation. The term refers to a flexible working culture where its members choose to work as freelancers or independent contractors and have more control over their schedule and working hours. Generation X and the Baby Boomers before them were of the traditional economy – they were used to a single finance stream and a full-time job. The new kind of workforce, however, spends a lot of time on their mobile device and prefers to have multiple sources of income – a significantly different situation from that of previous generations. It is clear that the gig economy is here to stay, and its growth trajectory so far has been impressive. Let’s consider the projected gross volume of the global gig economy:

It’s not just a fad – the gig economy currently generates $204 billion in gross volume across the world. Furthermore, according to research by Mastercard, the size of gig economy transactions in its online iteration alone is projected to grow by a 17% CAGR with a gross volume of ~$455 billion by 2023 due to factors such as evolving societal attitudes around P2P sharing and increasing digitization rates in developing countries.

So, a couple of questions arise here:

  1. Are the payments and banking going to be different for the gig economy?
  2. Does it make sense that with such volumes, payments and banking for gig economy workers would be an area of major importance? Are banks dealing with the evolving needs of this customer segment? If not, what’s the alternative?

Traditional Banking Services: Broken for the Gig Economy

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