Traditional Banks Have Failed Independent Workers. But Fintech Offers a Glimmer of Hope.

Carolyne Njeri

Traditional Banks Have Failed Independent Workers. But Fintech Offers a Glimmer of Hope.
Banks have had a hard time keeping up with the rapid growth of the gig economy. This has created a niche for fintech companies that seek to offer speedy, reliable, less expensive solutions designed to offer some reprieve.

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With the freelance population skyrocketing across the globe, issues like ease of payment and accessibility of financial solutions have arisen in plenty. Although the gig economy offers people a stab at financial stability, some gigsters are having a hard time receiving and managing their funds as they would like. Traditional banks have all but ignored the needs of the growing self-employed population. Despite their vast access to capital and ability to handle international payments (the bulk of payment for freelancers in the developing world), they’ve been unable to offer timely solutions that address the pain points of the gig community.

For this reason, freelancers are turning to Fintech (Financial Technology) companies such PayPal, Payoneer, and Wise (formerly TransferWise) to send and receive their payments. Where banks take 3-5 business days to process funds, these platforms do it in hours- painting a picture of just how slow banks are in keeping up with the speed of the industry. But freelancers need more than just cash payment platforms, some need help with bookkeeping, tax payments, savings and financial planning. This is where companies like FreeAgent, Xero and Pymnts step in to provide ingenious solutions to freelancers who need affordable and reliable financial services. Others, like new-comers Willa and Coconut, are looking to cater to freelancers exclusively.

Fintechs and the Freelance Industry

In the past few years, the legitimacy of freelancing as a career option has been increasing. And as an effect of the pandemic, more people have gravitated towards the industry due to its stability and autonomy. 

Since the freelance economy is mostly digital, it has led to a sharp increase in online monetary transactions. In fact, there are more transactions happening right now than at any other point in history. This transfer of money, especially cross-border, has sparked the need for fintech solutions that cater to this fast-paced market.

Handling small-time payments can be simple with the numerous payment platforms in existence today. But as clients and income streams increase, tracking and keeping up with transactions becomes an uphill task. 

As a freelancer, you lie in between consumers and business owners, and as such you require tools that can manage both aspects of your life. You need to keep track of the money you receive and pay out, while staying on top of your tax remittances and savings. Some freelancers and small business owners, due to a lack of options, run their personal and business affairs on one account, which can lead to difficulty in planning and management. 

According to Oona Rokyta, co-founder and CEO of Pymnts.com, a fintech company targeting freelancers, “It is critical for freelancers to separate their business and personal finances, and account for everything appropriately. Mixing finances can have negative implications on tax calculations, personal savings and more.”

Companies like Willa on the other hand, are looking to bridge the gap between freelancers and their money. In exchange for a 2.9% transaction fee, the company will pay the freelancer after they file an invoice, instead of waiting for the employer to release funds. In this way, they help ease the pressure off the freelancer in case their employer fails to pay them on time. 

Other platforms like Tesorio and Fundbox offer advances to financially drained freelancers as they wait for their payments to materialize. 

Fintechs in MENA

It shouldn’t come as a surprise that the fintech market in the Middle East is thriving; and why should it? MENA is a hub for innovation and technological advancements. In 2022, it is estimated that venture capital funding for financial technology solutions in the region will be as high as $2.5 billion

According to this investor, “roughly 85% of fintech firms in the MENA region operate on the payments, transfers and remittances sectors”- sectors that intersect with freelancers’ greatest needs. Another one reiterates the failure of banks to advance saying, “Banks have neither the willingness to take the risk or the drive for innovation…”

Perhaps this growth in fintech solutions has been sparked by the growing number of freelancers. It is estimated that this year, 9 in 10 MENA professionals will freelance. These professionals will require reliable transaction platforms to receive their payments, creating a market for fintech startups.

Although the MENA region is vast,  banding together millions of people with various cultural and socio-economic backgrounds, it has provided innovators with a ground to create, test and build successful companies. Another reason why fintech startups seem to be having success, is due to the low penetration rate of banks. It is assumed that less than 70% of people living in Northern Africa and the Middle East have bank accounts.

Some Fintechs companies making waves in the MENA market;

  • PayTabs – Offers payments solutions that enable independent workers and business owners to run transactions seamlessly, securely and efficiently.
  • Beehive – For freelancers and small business owners looking for capital, Beehive promises to provide fast, affordable finances from investors to help them grow.
  • Souqalmal.com – A website that allows its users to compare prices of financial products across different platforms.
  • MadfooatCom – Enables its users to make payments, create receipts and invoices across the region.
  • Remitr – Worth over $2 million, the company provides international money transfer solutions.

The Takeaway

Because of how fast the freelance economy has been growing, banks have had a hard time keeping up with the changes. This has created a niche for fintech companies that seek to offer speedy, reliable, less expensive solutions designed to offer some reprieve. Not only have these businesses stepped in where banks have failed, but they’ve also legitimized the freelance industry because those who venture in now are assured that they’ll receive their money as soon as it is released.

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