October 18, 2021
There's an untapped market of customers just waiting for the right banking app to come along. It's a market that has different needs than traditionally employed workers, and therefore needs something different than a traditional bank account.
Who is this eager audience? It's the 68 million workers that make up the independent economy. These freelancers, contractors, gig workers, and on-call workers have very different requirements than typical W-2 workers, like tracking all app and invoice payments, tracking deductions, making quarterly tax payments, and more.
For our new report, “Banking the Independent Economy,” we recently talked to independent workers to find out how they bank, what they like about their bank, and if they're looking to make any changes. We found that 51% don't have a separate bank account for their independent work income and expenses, but 46% of that population wants to find one.
We also found that only half are satisfied with their current bank, and 68% want to change banks in the near future. Much of that dissatisfaction is due to high fees and bad customer service, but it's also due to a lack of features that truly cater to their needs.
So, if independent workers could design their ideal banking app, what would it include? Here's what we found.
They want a bank account that’s a mobile app
The number one feature independent workers want is a bank account on a mobile app. Not only is mobile-first the future of banking, many independent workers use apps to interact with clients, find gig work, or sell their products, so their business is already conducted through their phone anyhow.
They want a bank account that can identify business-related, tax-deductible expenses
Unlike W-2 workers, independent workers are responsible for calculating owed tax on income, keeping track of deductions, paying out estimated quarterly tax payments, and other financial tasks. This is why they desire a bank account that assists them with the administrative side of being an independent worker: one that can identify tax-deductible expenses, so they can keep organized and ready for tax time.
They want a bank account that can automatically set aside a percentage of earnings for tax withholdings
Unlike W-2 workers who have state and federal tax calculated for them and deducted automatically from each paycheck, independent workers are responsible for doing those calculations each time they receive income, and holding aside that percentage to pay each quarter. Independent workers are looking for a banking app that can do that for them automatically, and earmark money into an account so they won't forget to do it.
They want a bank account that can categorize expenses directly
Not only do independent workers need to keep track of their income, but they need to keep track of their business-related expenses. They're looking for a banking app that can help by automatically categorizing or tagging expenses. This can not only cut down on the time and effort they put into their financial management, but can make sure they're tracking the right expenses.
They want a bank account that can automatically set aside a percentage of earnings for other types of savings
Independent workers are also looking for a bank account that can set aside money for other types of payments and savings in addition to tax payments. This could be a straight savings account, or savings for health insurance payments, life insurance payments, retirement savings, and more (considering that independent workers rarely receive any kind of benefits through their clients).
They want a bank account that can help them budget
There’s a lot of financial awareness and management goes into the day-to-day life of an independent worker, which is why another benefit independent workers would like to see in a bank account is help with budgeting: for taxes, for business-related expenses, for personal-expenses, for health insurance payments, and more.
They want a bank account that has the ability to send and receive invoices to customers directly
Finally, independent workers would like to have their bank account include tools for invoicing as well, so that they're not having to track those payments through a third-party app. It goes back to the desire to have their bank help them solve pain points and provide helpful and time-reducing business tools.
The Ball is in the Banks’ Court
The onus now falls to banks to create the tools and features to help and grow the independent economy. "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,” says Eytan Bensoussan, CEO and Co-Founder of NorthOne. “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.”
Independent workers are looking for bank accounts with features that can solve their pain points. Which banks will be the first to solve them?