How fintech is missing out on 1.5 billion customers

It is catastrophic that 70 per cent of freelancers do not contribute to their pension, writes Hannah Duncan. It’s a big fintech opportunity.

Image source: Pexels/Ketut Subiyanto

“Imagine a bank that … literally … did your taxes for you,” whispers Dan Callis, a freelance SEO expert.

We both dream for a moment. When an invoice is paid, 20 percent trots off to a pot called “VAT”. 20 per cent jumps into a jar labeled “corporate tax”. And God knows how much is in an account labeled “Income Tax”.

Sighing, I steal a reluctant glance at my messy tide account. Why is this not available to freelancers?

“Banking apps try,” Callis grimaces. “But I think Monzo’s financial forecasting… it can’t… because my finances are so unpredictable”.

A $500 billion gap

Unpredictable pay is at the center of freelance life.

Around 40 per cent of us suffer from fluctuations of 30 per cent and above.

But Henry Oakes, co-founder and CEO of Gigpay believes the volatility is even higher. “During the quietest months, it’s not unusual for freelancers to earn nothing at all – in other words, a 100 percent ‘negative swing’ from their average monthly income,” he explains.

As Oakes reminds me, models, actors, stylists, film producers and many others often get paid their entire annual salary in just one or two invoices. Looking through my own accounts, my best month (July) brought in almost eight times as much as my worst (August).

Yet, for myself and the other 4.3 million freelancers in the UK, there is no support. It’s a shame because we add £278bn to the economy every year and we’d really appreciate some help.

Maria Praena, the founder of Studio Artemy, is one of the many freelancers who would probably benefit from better fintech. She has single-handedly created a thriving international business. But – annoyingly – Praena takes hours to resolve invoices, currency, cross-border payments and more.

“Friday is my business manager day,” she reveals. “Honestly, I absolutely dread and hate the moment.” Every minute takes time away from value-creating work. In addition, the stress of dealing with admin makes it harder for her to design new products. “I can’t get into the creative flow,” she sighs.

In contrast, large companies do not suffer from these problems. They benefit from an endless sweet shop of favors. Almost the entire financial system was built around them. Smaller businesses also receive support.

For decades, they have largely had access to bank accounts, financing, factoring and government schemes such as the 2020-2021 leave.

But for freelancers…? Oh… No. All we can do is try to fit into products designed for others. “Freelancers are forced to be square pegs in round holes”, emphasizes Craig J Lewis, founder of the American platform Gig Wage.

Former CEO of Crealogix, David Joyce, has recently returned to freelancing himself. As a fintech expert, he feels that freelancers are still waiting for their revolution.

“A lot of the disruption or innovation has been with SMEs. But freelancers are one step further away from that,” he elaborates.

How much longer do we have to wait? Between 2021 and 2022, UK freelancers fell by 5 per cent. Could more businesses have survived with support? Lost opportunities run past.

A universe of uncreated services

A handful of online banks and platforms advertise for freelancers. But when you dig into the details, they’re usually scaled-down versions of the sort of thing that Tesco or Walmart would use. Almost nothing is designed around the real life and needs of a freelancer.

Bukki Adedapo, country manager for Fiverr in the UK, talks to aspiring fintech partners every week, and he’s found the same thing.

“A lot of people are like, ‘Hey! You have these freelancers and we want to offer this solution to them, but it’s actually a solution that’s made for SMBs, it’s not made for individual freelancers”, he reveals.

Even Starling Bank – one of the most popular platforms for solo entrepreneurs – falls into this category. “We have a slightly agnostic view”, comments William Boocock, Head of Partnerships.

“I wouldn’t say there’s anything specific we aim to do for freelancers that we don’t do for companies or vice versa”.

Platforms like Starling and Xero offer plug-ins to help freelancers customize platforms. But these integrations are mostly designed for companies. Freelancers are not mini-Walmarts. We have unique business models. We need our own things.

Take barter for example. A large company can rent office space for money. But I? I exchanged three articles for membership in a business club. That’s how I prefer to pay for subscriptions and industry events too.

Freelance graphic designer Ana Sofia Mendes swapped artwork for wedding entertainment. “I contacted several pianists, but their schedule or prices didn’t match my budget,” she explains. “I ended up switching design skills.”

For the world’s 1.57 billion freelancers, barter is another means of payment.

Yet no technology company seems to have taken advantage of this. It is a universe of uncreated services. Globally, a market of 500 billion dollars is left in the dark.

Time for a vote

John Coldicott, CEO of Xero understands the problem. Alongside Starlings Boocock, he believes that freelancers do not have a voice in the macro economy.

“The balance is not very fair if you consider how large companies are represented in government versus smaller companies including freelancers,” explains Coldicott. “It’s not a big enough representation”.

For the record, UK freelancers turn over almost five times more than Tesco, seven times more than Sainsbury’s and over 25 times more than Marks & Spencer. We should have a voice. A damn loud one.

Both Xero and Starling work in different ways to increase freelancers’ interests. But they are limited in the type of service they can offer.

“As regulated entities you have some limitations in terms of how creative and crazy you can be”, comments Boocock, “We don’t want to get too far ahead of what the regulators want”.

Maybe the problem is systemic. Freelancers are forced into accounting structures designed for (and lobbied by) powerful corporations. We need our own champions.

What now?

I never thought I would feel so relieved to hear these words: “We’ve built technology for freelancers”. Gig Wages Lewis has long advocated for freelancers to get a decent deal. In 2014, he founded the platform to help businesses pay their freelancers seamlessly.

“Wages are the basis of economic stimulus and success”, he affirms.

Here in the UK, Oakes is also pioneering a freelance-first platform, Gigpay. He aims to help freelancers reduce income volatility with regular payments.

“It’s an app that equalizes income,” he explains. “It allows freelancers to do the flexible work they love with stable monthly pay.”

While these services are incredibly welcome additions, there is plenty of room for more. Consider maternity leave or paternity leave. Or integrations for legal assistance, insurance, savings or pensions.

Although some of these already exist, they simply do not reach enough freelancers. As of 2020, a catastrophic 70 percent of freelancers do not contribute to a pension at all. We need support.

Lewis also left a powerful message for other fintechs, which I cannot leave unwritten: “All fintech talks about is financial empowerment. All fintech talks about is the unbanked and serving the unserved. What I want to say is not just talk about it. Does”.