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October 11, 2021

Banking the Independent Economy: Insights From 400+ US Workers

The 68 million workers in the independent economy are seeking new banking options — because they don’t have any that adequately serve them.

Independent contractors, freelancers, content creators, on-call workers, and merchants are looking for bank apps and feature-rich accounts to help them manage the day-today financial obligations of self-employment, like tracking deductions, setting aside tax payments, budgeting, and even invoicing. They want to see their unique pain points addressed and solved.

Today, the independent economy is growing massively — it’s estimated that by 2025, over half of workers will be independent — but they are an underserved market when it comes to banking options, and don’t see the tools out there that fit their daily lives. This means that banks wanting to serve a new target audience and grow the future of the independent economy can step into this gap in the industry.

In order to understand more about this population and its banking successes and struggles, we turned to independent workers themselves to find out their banking habits, how they manage their accounts, if they’re satisfied with their options right now, and what their ideal bank account would look like.

Methodology:

On June 9, 2021, we surveyed 421 US independent workers who earn the majority of their income from independent or 1099 work and identified themselves as either a content creator, consultant, merchant, or on-call worker. For this survey, we did not include gig workers.  

Key Findings

When it came to how they manage their accounts, how they feel about their banks, and what their ideal banking app would look like, we found the following insights:

51% don’t have a separate account for their business income. Half of respondents pool their self-employed income into their personal account.

46% want to open a new account in the next year. Of those who don’t use separate accounts, nearly half want to open one — translating into 16 million of the 68 million current independent workers as potential future customers.

Only half are very satisfied with their bank. 51% are very satisfied with their current bank, while 34% are only somewhat satisfied, and 15% aren’t satisfied at all.

Dissatisfaction is from high fees, a lack of features, and poor customer service. The fees that frustrate them the most are monthly maintenance fees and overdraft fees.

68% say they are likely to change banks in the next year. Additionally, 52% say they would switch if another bank offered lower fees.

An ideal banking account would be mobile, identify tax-deductible expenses, and automatically set aside money for taxes. Independent workers are looking for a bank account that will help them navigate the financial management that comes with being self-employed.

Table of Contents

Part 1 - Profile of Who We Surveyed

Part 2 - How They Bank and How They Feel About Their Bank

Past 3 - Ideal Banking Account Features

Past 4 - What's the Future of Banking for Independent Workers?

Part 1: Profile of Who We Surveyed

On June 9, 2021, we surveyed 421 US independent workers who earn the majority of their income from 1099 work and identified themselves as an independent worker, with a variety of roles seen below (we did not include gig workers for this survey). 60.1% were male, and 39.9% were female. The majority (39%) are between the ages of 35 and 44, with 22.1% between the ages of 25 and 34. 14.7% are younger than 24, and 24.2% are over the age of 45.

They represent a variety of independent work

Our respondents represent a variety of different types of independent work. Our majority (31.1%) are independent consultants, professionals, or freelancers. 23.5% are content creators like streamers, musicians, or podcasters, and 23.5% are merchants or sellers who run shops or ecommerce stores. Finally, 21.9% are on-call workers like teachers and healthcare workers.

They are both newcomers and experienced independent workers

Our independent workers span a range of newcomers and longtime professionals. 15% have been earning self-employed income for only less than six months, and 18.5% have been working independently for six months to eleven months. 23.5% have been independent for one to three years, and 20.9% have been for four to six years. 22.1% have been an independent worker for over six years.

In looking at the total of respondents who have been independent workers for a year or less, we see that one-third (33.5%) would have started during the pandemic.

Their income varies

In terms of income generated over the past year, the majority of our respondents (23.5%) made over $100,000. 16.2% earned between $75,000 and $99,999, 19% earned between $50,000 and $74, 999, 20.7% earned between $25,000 and $49,999, and 20.7% earned less than $24,999. Additionally, those who have been working independently longer report the highest incomes.

Section Summary:

Our sample represents different work areas and niches across the independent economy, different lengths of work time, and different levels of income — which means they are representative of the variety of independent workers today.

Part 2: How They Bank and How They Feel About Their Bank

Independent workers have different financial needs, as they manage business income, taxes, savings, and other necessities on their own. We wanted to know how they were going about this, especially when it comes to how they split their accounts, their satisfaction with their current bank, and if they’re looking to open a new account in the near future.

51% don’t have a separate account for their earnings

Knowing that independent workers need to closely monitor their income, we wanted to know how they handled their accounts. We found that half (50.8%) are depositing their income into their personal account, while 49.2% use a separate business account for their income.

Those most likely to have a separate account have been working independently for one to three years, and make over $100,000 annually. However, both personal account usage and separate account usage spanned across all lengths of time and income levels.

The majority who have separate accounts have had it for 5+ years

For those who have a separate account, 18.4% have had it for less than a year, 18.4% have had it for one year, 12.1% have had it for two years, 15.9% have had it for three years, 13% have had it for four years, and 22.2% have had it for five or more years.

Those who have had their separate accounts longer have been working independently longer, and have higher incomes.


46% plan on opening a new account in the next year

For those who don’t have a separate account, do they plan on opening one? Nearly half (46.3%) said yes, they do plan on opening a business account for their earnings. 27.1% weren’t sure if they would, and 26.6% said they would not.

If translated to a macro level, this means that upwards of 16 million of the 68 million current independent workers will be looking to open bank accounts in the next year.

Most use national banks or local banks

The majority of our respondents (32.9%) use national banks like Wells Fargo Chase, or Citi, for their accounts, while 28% use a regional or local bank. 16.9% use a credit union, and 9.7% use a digital-only bank. 12.6% use another alternative.

For those that use a digital-only bank, lower fees are the primary driver

Those that choose to use a digital-only bank do so for a number of reasons, the largest being lower fees (26.1%). Other reasons include it being quicker to open an account with them than with a large bank (19.6%), a lack of trust in big banks (17.4%), better customer service (13%), and better features (10.9%). 13% cited other reasons for using it.

34% use a different bank from their personal bank

Do our respondents stay with the same bank for their accounts, or do they have their accounts spread out across different banks? 65.7% have both their personal and business accounts at the same bank. But 34.3% use different banks for their personal and business accounts, possibly seeking specialized features or offerings from other banks to serve their business account needs.

Only 51% said they were very satisfied with their bank

How satisfied are our respondents with their bank? A little over half (51.1%) say they are very satisfied with their current bank. 34.2% say they are only somewhat satisfied with their bank, while 14.7% aren’t satisfied at all

Those who are very satisfied tend to be with regional or local banks, and those who are least satisfied tend to be with national banks.


Dissatisfaction comes from high fees, a lack of features, and bad customer service

For those who aren’t satisfied with their bank, we wanted to know the reasons why. For the majority of respondents (20.4%), the fees are too high. 19.9% say their bank lacks features, and 18% are dissatisfied because of bad customer service. 15.1% have security concerns about their bank, and 13.1% are dissatisfied with how long it takes transfers to process. 13.6% cite other reasons they’re dissatisfied.

Monthly service fees and overdraft fees frustrate them the most

For those frustrated by fees, monthly maintenance and service fees are the most frustrating for our respondents (30.2%), followed closely by overdraft or insufficient funds fees (26.8%). They’re also frustrated by out-of-network ATM fees (15.9%), wire transfer fees (15.2%), and international transaction fees (11.9%).

68% are likely to change banks in the next 12 months

Considering many are looking to open new accounts, as well as seeking out specialized features and lower fees, we wanted to know if our respondents are looking to fully change banks in the next year. 38.5% say they are very likely to change banks, while 29.9% say they are somewhat likely to change banks. 31.6% say they are unlikely at all.

Those who say they are very likely to change are currently with regional or local banks, followed by national banks, and tend to make over $100,000 in yearly income.

Over half would change for lower fees

Because we discovered that fees are a pain point for our respondents, would they switch if another bank offered an account with lower fees? Half (51.8%) said they would switch banks. 20.2% said they would not — meaning that something other than the fees are keeping them loyal — and 28% reported that they already don’t pay fees at their bank.

Section Summary:

Independent workers are tasked with not just managing personal finances, but professional income streams from invoice payments, app payouts, and ecommerce sales, as well as manage their own tax savings and other savings. We found that 51% are managing their professional lives from their personal bank accounts. However, 46% of those do plan on opening a separate account — which means that 16 million independent workers will be looking for business accounts in the next year. And with half of our respondents dissatisfied with their current banks, and 68% saying they’re likely to change banks, there's a great opportunity for banks who create new offerings to step in and serve this target market.

Part of what independent workers will be looking for in a new bank and accounts are lower fees, plenty of features to help them, and great customer service. In our next section, we’ll see what such a banking app might look like.


Part 3: Ideal Banking Account Features

Independent workers have different financial needs as they manage themselves as a business of one. So when it comes to bank account offerings, which features would they want? Essentially, if independent workers could design a bank account, what would it look like?

#1. A bank account that has an easy to use mobile app for my phone (52.5%)

The number one feature was, of course, that their bank account would be accessible from a mobile app. Not only is mobile-first the way to go today, with many independent workers using apps to interact with clients or sell their products, the smartphone is the new office.

#2. A bank account that can identify business-related, tax-deductible expenses (52%)

With independent workers responsible for doing their taxes, calculating how much they’ll owe, and keeping track of their deductions, our respondents wanted a bank account that can help them identify business-related, tax-deductible expenses, so they don’t need to take time and energy to do so.

#3. A bank account that has the ability to automatically set aside a percentage of earnings for tax withholdings (49.4%)

Additionally, independent workers are looking for a bank account or banking app that will help them calculate how much they’ll owe in federal and state taxes, and set it aside for them automatically, instead of them having to do it manually. 

#4. A bank account that has the ability to categorize expenses directly (48.7%)

They’re also looking for a bank account that can categorize expenses for them, instead of them having to categorize them manually. This also cuts down time and effort on the financial management side, and can make things easier when it comes to tax time.

#5. A bank account that has the ability to automatically set aside a percentage of earning for different types of saving (47.5%)

Similar to the above feature of setting aside a portion of income for taxes, independent workers are also looking for accounts that can automatically set aside a percentage for other types of savings, either personal or business-related.

#6. A bank account that has the ability to help you budget (47.5%)

For independent workers, it’s not just a matter of setting aside part of their income for taxes. It’s also budgeting appropriately so that they don’t have to touch that portion that’s set aside. They’re looking for budgeting assistance right in their banking app.

#7. A bank account that has the ability to let me send and receive invoices to customers directly (without needing to use an app like QuickBooks) (47%)

Finally, independent workers would also like invoicing features built into their banking app that will help them create and send invoices, track and receive payments, and integrate those numbers into their account.

They want their bank to assist with emergency and retirement savings

In addition to features, we also wanted to know what was most important to our independent worker respondents when it came to what a bank could help with. Half of our respondents wanted assistance with emergency savings (25.2%) and with retirement savings (24.9%). 20.2% wanted assistance with business insurance, 16.4% wanted assistance with healthcare insurance, and 13.3% wanted assistance with other non-banking services.

Assistance with emergency and retirement saving would certainly be a key feature for independent workers, who are outside of an employer’s purview, where taxes, health insurance, and other benefits are simply deducted each paycheck. Independent workers need to manage their own taxes, retirement savings, health insurance payments, and more — so it makes sense they would look for assistance with these from a bank.

Managing and categorizing expenses is the most valued feature

If our respondents were to change banks — and 68.4% said they are likely to — what would be the thing that would make them switch? 

Most important features would be:

  • Ability to manage and categorize expenses (26.1%)
  • Automatically set aside funds for tax withholding (18.1%)
  • Automatically set aside funds for saving (17.1%)
  • Mobile app available (16.2%)
  • Integrations with bookkeeping/invoicing tools (9.7%)
  • None of these features would impact my decision (12.8%)

Section Summary:

Independent workers are looking for a bank account that can become their financial manager, now that they alone are responsible for all their financial needs and requirements. They want a bank account that can help them track expenses, set aside a portion of income for tax payments automatically, help them budget, send invoices and receive payments, and more. It’s a gap that’s ready to be filled by banks who want to serve independent workers.

Part 4: What's the Future of Banking for Independent Workers?


Hantz Févry, Co-Founder & CEO, Stoovo

The future of banking is being shaped by independent workers who are typically overworked and underbanked. The post-pandemic 1099 economy is now at 57 million workers; most are contractors earning relatively high hourly wages. However, most of these workers who depend on platform-based earnings suffer from income volatility.  If you don’t earn enough in the first place, how can you build emergency savings or even have working capital to pay your bills?


Banks need to address this growing base of gig workers.

Independent workers need overdraft protection, and they need built-in financial management tools to help them create safety nets and build their credit, not draconian fees causing credit scores to plummet when their accounts are in arrears. 

Traditional Neobanks are not enough for these workers; banks need to address both sides of the balance sheet to serve this emerging workforce adequately. Why should a bank just keep your money, why can’t banks help you earn more, save more, and manage expenses? The future of work is already here, banks just need to catch up.

Eytan Bensoussan, CEO and Co-Founder of NorthOne

"More Americans than ever are turning to technology-focused challenger banks because they understand how to simplify users' lives. The future of banking for independent workers isn't traditional bank branches with free coffee and pens, it's mobile-first banking powered by teams and technology focused on making the handoff between work and banking as seamless as possible.


Technology and user-focused product development enables challenger banks like NorthOne to provide an empowering experience to independent workers. The simplicity, ease of use, and intelligence of emerging banking options reduce the cognitive load these workers need to manage in their day to day. Imagine never having to think about banking again. Imagine never having to plan a trip to a branch or clear out hours to wait on hold with your bank’s support team. That’s the starting point for most emerging banking options. It’s on top of these assumptions that the future of banking is being built. 

For example, through integrations with accounting tools like Quickbooks and Freshbooks, eCommerce platforms like Shopify or Etsy, or integrated invoicing tools, challenger banks make taxes and tracking incomes and expenses far easier for independent workers. All these streams of data are finally connected. And they can finally be made digestible and intelligible for the typical independent worker who is already overwhelmed with everything else on their plate."

Michael Rangel, Founder & CEO of Novo

“The future of banking for independent workers isn’t just about keeping their money safe — it will be about creating a more personalized product for how they do business. The days of jamming a square peg through a round hole are slowly dissipating as banking products become more customizable for the new age of work.

For independent workers, the most valuable commodity they have is their time. In the coming years, I anticipate we’ll see many more banking products give independent workers the tools to accomplish all of their banking needs in minutes, right from their phone, which will give them more time to focus on doing the actual work that makes them money. 

On a related note, I also imagine we’ll see many more banking products offer independent workers the ability to conduct many more financial tasks right from their phone — like invoicing and light-weight accounting functions — which will save them both time and money.

Finally, the future of banking for independent workers will be fee-free. Novo is adamant about not charging fees, and I’m hopeful that a fee-free commitment will be the norm rather than the exception in our industry in the coming years.” 

Gilad Uziely, Co-Founder & VP BD at Lance 

“Everyone will be an independent worker in the future. We already see the growth of independent workers surpassing prior estimates. The reason is we’re all exploring how to navigate different types of work contexts and pathways to match our current life chapter needs and longer-term visions.  

Future financial products and offerings will need to be flexible, goal-enabling and contextualizing. Flexibility will accommodate the increasingly dramatic shifts independent workers take between work contexts and their related finances. It’s never been easier to shift from one job to multiple income streams - thanks to marketing software, ecommerce platforms and marketplaces. 

Independent workers inherently are - or quickly become - goal-driven. Independent workers don’t want to land on another blog post about banks' standard checking and savings rates. They want savvy financial platforms to guide them to realizing their goals, faster. 

Finally, with all the data consumers are sharing with banks and fintech companies, it’s no wonder they want more. The future of banking for independent workers will contextualize banking and right-sized business offerings specific to each customer. The banks and fintech companies that provide the most specific, contextualized, and trustworthy opt-in offerings will win lifelong members.”

Donald Hawkins, Founder of First Boulevard

“With COVID's impact on the distribution and digitization of America's workforce, one thing is clear, the era of the independent worker is here to stay. With so many new entrepreneurs voluntarily and involuntarily making the leap into the unfamiliar world of running a business, the need for services to support their weaknesses is critical. Offerings that support day-to-day transactions, payroll, accounting and taxes are fast becoming table stakes for today’s savvy business owners. The days of downloading multiple desktop/mobile apps are numbered and APIs can only do so much. Banks and fintechs that lean into innovation to meet independent workers where they are, while building features to meet them where they’ll be, will win big in the end.”

Kristal Bergfield, VP, Business Development and Partnerships, indi 

“Independent workers need faster access to their earnings. Not only that, but they need a banking product that can help them build a solid financial future. According to a PYMTS.com study, 85% of gig workers said they would work more often if they were paid faster. Additionally, 58% of full-time gig workers said they would have a hard time coming up with $400 to cover an emergency bill, according to the same study.

There’s an urgent need for unique banking solutions that facilitate instant payments, allowing workers to get paid the money they’ve earned at the end of the day rather than waiting for the end of a two-week pay period. Being able to buy groceries on the way home from a job is a powerful way to support and empower independent workers. Additionally, much of the independent workforce is underbanked and can’t access traditional banking products because of credit history, job volatility, and temporary living arrangements.

Independent workers carry burdens that W-2 workers typically don’t have to worry about. Not only do independent workers often work shifts to earn income, they need to track and categorize expenses, pay quarterly estimated taxes, manage work shifts among several employers, and balance many other time-intensive administrative tasks. These tasks take time away from the hours they have available to complete shifts and earn income.

It’s imperative that banking products empower and enable freelancers to conduct these tasks all on one platform: get paid instantly, track income, categorize expenses, export data, and work toward a healthier financial future.”

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“We believe the future is banking, taxes, and expense management all-in-one, designed to save independent workers time and money, so they can focus on what they do best.” Ayal Levin General Manager, Lili 

Part 5: Who is Building the Future Banking for Independent Workers?

A number of startups are already embracing these opportunities to offer independent workers accounts tailored to their needs, preferences, and lifestyles. Here are a few:

An "intuitive business bank account designed for freelancers," Lance includes budgeting tools, tax deduction tracking, and even allows for automated tax payments.

Oxygen's banking app caters to freelancers and small businesses, and provides no fees and cash back options in four "loyalty levels."

Indi accounts focus on freelancers, contractors, and gig workers, providing them app-based expense tracking and automated savings for taxes, among other features.

Branch is designed for businesses who work with freelancers and gig workers to help facilitate payments faster and easier, and to streamline the payroll process.

Touted as "banking designed for freelancers," Lili has created an all-in-one app that tracks expenses, sets aside income for taxes, and more.

NorthOne promises you'll "never step foot in a bank branch again" with direct payments, budgeting, app integration, and other tools for small businesses.

Stoovo's app integrates with over 6000 gig work platforms to maximize opportunities and income, offers tax calculators, budgeting tools, and more.

Varo calls itself "a bank for all of us": no credit check, minimum balance, or fees, and it offers app-based banking, automated savings, and more.

Chime offers no fees and no minimum balance, as well as easy transfers, early payout, and a credit-building credit card.

Mercury is "banking built for startups," and offers no-fee accounts with vendor pay, admin/team access, app integrations, and more among different tiered pricing.

First Boulevard is "banking built for Black America," and offers no fees or minimums, spending insights, and financial education in order to build generational wealth.

The app-based accounts at Current are fee-free, and offer spending insights, automated "savings pods," budgeting tools, round up options, and more.

TAB Bank offers a variety of account options for small businesses and individuals, as well as integrated invoicing — they also offer accounts specifically for truckers.

Daylight is banking for the LGBTQ+ community, and offers no fees, chosen name cards, financial coaching, cash back for supporting LGBTQ+ businesses, and more.

Purple is a mobile banking app for traditionally underbanked individuals with disabilities, which offers no fees or minimum balance, spending tracking, and more.

The mobile banking app N26 offers no fees, cash back, and early pay, as well as automating savings into "Spaces," and budgeting tools.

Revolut "says goodbye to financial borders" and offers tiered mobile accounts with budgeting tools that transfer and exchange money (even to crypto).

Novo is banking for small businesses and freelancers, and in addition to deposits and transfers, offers invoice sending and tracking, and business tools integration.

Conclusion:

Independent workers are seeking more from their banks.

They’re not just looking for a place to keep their money, but a bank that will help them manage their work as a consultant, freelancer, content creator, on-call worker, or merchant, and all the nuances and requirements that come with it. They want a bank that can help them set aside their estimated tax payments, that can categorize expenses and help track deductions, and that can offer business tools like invoicing and budgeting.

With 68 million independent workers — a number that’s only going to grow — it’s an opportunity for banks willing to create feature-rich, specialized accounts to step in and solve the pain points of independent workers and to help build the future of the independent economy.

Authors

Trent Bigelow
CEO, Abound
Alex Cram
CTO

Ready to build the future independent workers want to work in?