The Gig economy sector – a free-market system hosting temporary positions, wherein organisations contract with independent workers for engagements usually having a shorter-term – encompasses all the characteristics of a promising financial services opportunity. The sector accounts for a levelheaded income and volume – millions of professionals forming a largely unserved market. Truelancer reports that while the global freelancer market stands at $2-3 billion (growing at an annual rate of 14%), India, in its current phase of gig work development, accounts for $1 billion of the global market. As of 2019, India accounts for 15 million freelancers in its gig economy workforce actively offering their specialised services on independent contracts in IT and programming, HR, finance, marketing and sales, design, animation, content management, and academic writing industries. TeamLease reports that an estimated 56% of fresh employment in India is getting created by the gig economy companies, incl. the blue-collar and white-collar workforce.
The alarming irony of the gig economy in India, however, is the fact that the engaged workers are not receiving any social security, insurance, etc. As a result, there is a looming danger that it might just widen the already pervasive and unregulated informal labour base of India – since economists are of the view that in India, 35% of the workforce has been associated with casual labour. The gig economy sector of India is also perhaps one of the most financially underserved areas. It is so because traditional financial firms follow stringent credit policies and they haven’t yet recognised flexible work sector and the opportune nuances of other new-age professions, for e.g., a freelance home chef, traditionally isn’t eligible to avail a loan from a bank. Also, as for the investment front, products like systematic investment plans (SIPs) do not offer flexibility or lenient terms in regards to the regularity of payment. A real-time analysis of freelancers’ credit capacity can allow lenders to “de-risk” gig worker loan application, if two core parameters of borrower evaluation are satisfied – “capacity to pay” (a borrower’s capability to repay) and “willingness to pay” (a borrower’s tendency to pay – admit that even people who earn hefty money aren’t at all times dependable and creditworthy).
Though, with increasing formalisation of the freelance workforce (skilled, semiskilled, unskilled – organised and unorganised) happening in the gig economy sector, afresh legislative frameworks (e.g., a revision of labor laws: offering social security, health and statutory benefits – minimum wage, and insurance for gig economy workers, etc.) are anticipated to be enacted in the future to ensure job security and benefits for such a largely unprotected resource base of talent. Emanation of tailored credit and loan demands from the gig workers is also expected to develop in the future as the quantum of workforce employed in this economy soars not only in tech-metros namely Hyderabad and Bengaluru but also in the capital New Delhi – having roughly 1.3 million Ola and UBER drivers whilst also adding around 5, 60,000 gig workers in the six-month period ending 31 March 2019 (according to TeamLease Services data). The onus of catering to the novel credit demands of and offering a regular cash-flow to the gig economy workers would lie on the innovative FinTech companies. The financial technology companies, in partnership with NBFCs and banks, are poised to offer microcredit to the rising volume of workers joining the promising gig economy of India. As a result, the demand for personalised offers to the core human capital (fuelling entrepreneurship) resources will augment, leading to the development of an ecosystem having even more hyper-personalised services on offer from the FinTech players and banks (or NBFCs) in cooperation.
FinTech is now a catchphrase – one that promisingly attracts due attention in the financial services sphere with disruptive technologies on offer (viz. mobile payments, digital fundraising, money transfers, loans, and asset management). The momentum caught-up by FinTech services in terms of attracting venture capital (VC) funds in 2018 was noteworthy with $2.34 billion from 245 deals. The space left vacant in the preceding decade by big banks got filled by FinTech lenders as they began offering innovative personal loan solutions to small businesses and gig workers in the wake of severe credit crunch experienced by these workforces owing to them standing ineligible to be served by traditional banks.
Given the broad diversity of cultures and languages in India, the FinTech and modern banking services’ recipients are as unique as they can possibly be – so will be their service expectations when the next 500 million users will be served in the future. A vital challenge would be reaching the people interactively by servicing in Indian languages’ dialect and voice (search and recognition) in digital payments – also reducing financial illiteracy. Since hiring dedicated staff along with allocating commercial spaces in offices for them is getting costly with each passing quarter, coupled with the fresh recruitment challenges and unique nature of the in-demand roles (with even more novel roles yet to emerge), the companies willing to outsource their non-core tasks will have to rely on hiring from the gig economy of the workers for such roles. This momentum is set to spur the establishment of robust payment mechanisms for such short-term gig workers – the sort of demand that novel digital payment (FinTech) solutions can fulfil – thereby, fulfilling the credit needs of otherwise not so securely tenured workers. With the incoming of technology companies, the data of workers associating with companies have gotten accessible, such as their demographics, preferences, expense habits, where they are working, etc. — thereby enabling job security.
The future course suggests that traditional banks will probably espouse or assimilate innovative FinTech services as an innate strategic element of their core service offerings for sustaining their business presence. National regulators will also influence the landscape of the payment industry by implementing game-changing laws which might give either side an advantage in the financial market. This is the reason why the FinTech companies need to endeavour to offer innovative services to traditional banks globally. The next wave of FinTech has arrived and is set to transform the perception of FinTech as it is anticipated to transcend FinTech beyond being a standalone industry – where it not just disrupts but also is used as a key strategy for companies to advance and redefine financial services (with greater collaboration and partnership among technology firms and institutional companies, e.g. NBFCs and banks). Several FinTech firms, such as Bon Credit, are aiming to offer financial services, meant to cater to the unique needs of Gig economy – viz. flexibility and really short turnaround-time (TAT).