November 1, 2021
We hear a lot about independent workers these days: people leaving their 9-to-5 jobs to go freelance, taking up gig work after hours, or seeking out alternatives to traditional employment.
But does anyone think about how they do their banking?
Do banks consider how the current 68 million independent workers — which are expected to reach 90 million by 2028 — manage their finances? If banks did think about them, they would see that they’re an untapped market waiting for someone to realize that they need something different than the traditional account.
“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,” says Hantz Févry, Co-Founder and CEO of Stoovo. “Banks need to address both sides of the balance sheet to serve this emerging workforce adequately.”
If you’re a bank looking for a new market, here are ten things you should know about independent workers that we uncovered in our report on “Banking the Independent Economy.”
1. 51% lump personal and business into one account.
Best practices for business owners include opening a separate bank account for business income and expenses for easier tracking and better visibility into deductions come tax time. But only about half of independent workers have a practice of splitting their finances into two accounts. It could certainly be personal preference. Or, it could be that independent workers haven't opened a business account because they haven't found a bank that fits their unique needs.
2. 46% want to open a new account in the next year.
Of those who don't have a separate account, nearly half want to open a separate account in the next year. This signals two things. The first is that nearly half of independent workers with one account have gotten to the point of maturity with their work that they want to move forward with two accounts. And that makes sense, considering, for example, that the number of people with side gigs in 2020 rose 5.3% to 15.8 million, from 15 million in 2019. It also signals that there is a huge market looking for a new banking product.
3. Only half are happy with their current bank.
Our report found that only 51% are "very satisfied" with their current bank, while 34% are only somewhat satisfied, and 15% aren’t satisfied at all. Dissatisfaction means that customers are ready to be lured away to other more appealing options. Given that many want to open a new account in the next year, there's an opportunity to gain new customers by offering a bank account that caters to their unique needs.
4. High fees, a lack of features, and poor customer service cause that dissatisfaction.
According to the report, independent workers are dissatisfied with high bank fees, and they are also disappointed with the customer service. But they are also dissatisfied with the lack of features their bank offers. Since independent workers are responsible for calculating their own tax payments, keeping track of deductions and expenses, and other business actions, they're looking for a more robust bank account that can solve their pain points.
5. They want an account that automatically sets aside earnings for taxes or other savings.
When it comes to the ideal banking app, independent workers want their bank account to automatically set aside a percentage of income for their quarterly tax withholdings, or other savings. Unlike W-2 employees, independent workers don't receive a paycheck with withholdings already taken out. With every invoice payment, app payout, and sale, independent workers must calculate how much taxes they owe, and set that amount aside to pay into their quarterly estimated taxes. Additionally, they need to set aside money for savings, business expenses, health insurance payments, and more.
6. They want an account that can identify business-related expenses.
Additionally, independent workers want a bank account that can automatically identify their business-related expenses and tax deductions, and categorize them. Because independent workers function as small businesses of one, they need to keep a tight hand on their financial management. Independent workers are looking for a bank account that can ease a bit of that work for them.
7. They want an account that can help them budget.
Similarly, independent workers are looking for a bank account that has budgeting features and tools that can help them keep their business-related expenses and income in order. While there are third-party budgeting apps out there, why not have it in the app so they can manage everything in one place?
8. They want an account that has the ability to send and receive invoices directly.
In addition to keeping everything in the app, independent workers would like a bank account that has invoicing features as well, so they can bill and receive payment into their account directly. Again, it goes back to facilitating their administrative tasks, and making that aspect of their lives more efficient.
9. They want their bank to assist with savings and insurance.
Independent workers not only have to withhold their deductions and tax calculations themselves, they need to have the discipline to hold money in an account for future payment. This might be why independent workers also want their banks to assist them with savings, like emergency savings and retirement savings, and to assist with business insurance and healthcare insurance (only 4% of gig workers are offered medical coverage).
10. They want an account that has a mobile app.
Finally, independent workers want a mobile-first bank account that allows them easy access from their phone — which is where most are doing their independent work via gig apps and freelance apps anyway.
Listening to Independent Workers
Now it’s up to challenger bank founders to decide whether they’ll listen to independent workers and create new banking tools and options around their needs, or let the 68 million freelancers, gig workers, contractors, and on-call workers remain an untapped market.