Navigating the Gig Economy: How to Expand Your Customer Base & Increase Revenue

The gig economy in the United States has witnessed explosive growth in recent years, reshaping the employment landscape. According to a study by Upwork, an estimated 36% of the U.S. workforce participates in freelance or gig work in some capacity. This translates to around 57 million Americans, and the numbers are projected to rise.

With more Americans embracing the flexibility and independence offered by gig work, it’s crucial for financial institutions to understand the unique financial management challenges faced by gig workers. By doing so, banks and credit unions can capitalize on meeting the financial needs of this growing segment of the workforce.

FINANCIAL CHALLENGES FACED BY GIG WORKERS

The gig economy encompasses all sorts of freelancers, independent contractors, and “solopreneurs” – everything from delivery drivers and dog walkers to Etsy sellers and skilled consultants. While gig workers appreciate the freedom and autonomy their work provides, they also encounter specific pain points that make managing their finances more challenging.

Gig economy workers often grapple with financial instability due to irregular income streams. Unlike traditional employees, gig workers don’t have the luxury of a steady paycheck. Instead, they face a rollercoaster of earnings, making budgeting and saving a considerable challenge. Inconsistent income can lead to difficulties in covering basic living expenses, qualifying for mortgages and other loans, and planning for the future.

Taxes are also more complicated for gig workers. Instead of receiving one W2 from their employer, they may have multiple 1099 forms to file with their return. Gig workers are responsible for self-employment taxes, and they must keep accurate records of any tax-deductible expenses they incur, such as gas or supplies.

Many entrepreneurs also lack access to longer-term financial tools, such as retirement plans, which can leave them financially vulnerable in emergencies or during retirement.

THE OPPORTUNITY FOR FINANCIAL INSTITUTIONS

It’s estimated that freelancers contributed $1.3 trillion in annual earnings to the U.S. economy in 2021. Self-employed workers need everything from checking and savings accounts to loans and credit cards, presenting a golden opportunity for banks and credit unions to expand their customer base and increase revenue.

To effectively serve gig workers, financial institutions need to consider:

• Verifying Income in New Ways: Traditional methods of income verification don’t always apply to contract workers. Banks need innovative ways to assess their creditworthiness.
• Offering Flexible Banking Solutions: Financial products designed for steady incomes may not suit gig workers. Flexible banking solutions that adapt to variable incomes are the answer.
• Providing Access to Benefits: Since gig workers lack access to employer-sponsored benefits, financial institutions can fill the gap with health savings accounts and retirement savings plans.
• Delivering Insight to Reduce Financial Illiteracy: Many independent contractors may not have a strong financial background. Providing educational resources and financial planning tools can empower them to make informed decisions.

SUCCESSFULLY MARKETING TO GIG ECONOMY WORKERS

The gig economy is here to stay, and financial institution marketing leaders need to know how to effectively market their services to self-employed consumers. These strategies can help you reach more independent contractors, cross-sell new products and services, and build loyal relationships with gig workers.

• Targeted Outreach: Understanding your audience is key. Financial institutions should employ data analytics to identify gig workers within their customer base and tailor marketing efforts accordingly. Segment your marketing campaigns to address their specific needs, such as through budgeting tools, flexible credit options, or retirement planning services.
• Digital Accessibility: Gig workers live in a digital world. They rely on smartphones and online platforms for work and life. To reach them effectively, financial institutions must ensure their services are accessible and user-friendly through secure online banking and mobile banking apps. An intuitive, seamless digital banking experience can be a strong selling point.
• Customized Financial Products: One size doesn’t fit all in the gig economy. Financial institutions should develop a range of flexible financial products that cater to the varied income patterns of gig workers. Consider offering:
  • Income-smoothing accounts: Tools that help gig workers set aside a portion of their earnings during high-income periods to cover lean months
  • Short-term loans: Accessible credit options with favorable terms for gig workers facing unexpected expenses
  • Retirement plans: Tailored solutions that address their long-term financial security needs
• Financial Education and Advice: Empower gig workers with financial knowledge. Host webinars, create educational content, or offer one-on-one financial counseling sessions. By demonstrating your commitment to their financial well-being, you can build trust and loyalty.

By recognizing the unique financial needs of gig workers, addressing their pain points, and implementing strategic marketing approaches, financial institutions can ride the gig wave to prosperity while empowering gig workers to achieve financial stability and success.

At LIGHTSTREAM, we know what works for banks and credit unions. We offer a full array of branding, creative, and web design services to help your financial institution succeed – like Strategy Academy, our comprehensive digital resource library for financial content. When you subscribe to Strategy Academy, you’ll get access to hundreds of timely and informative financial wellness articles, videos, social posts, and more. Connect with us today to learn more.