August 22, 2016
What Gig Economy Means for FinTech
All companies must take advantage of the disruptive gig economy to remain smart and streamlined, adapting to consumer needs.
Earlier, I discussed the implications of the gig economy on the insurance industry. We concluded that the existence of “crowdworkers” in the gig economy creates four main opportunities for insurers: a faster flow of information, claim process efficiencies, information customization and cost efficiencies.
We at WeGoLook believe all industries must take notice of the disruptive gig economy to remain smart and streamlined, adapting to consumer needs.
What I want to do today is focus on the traditional finance industry, which includes insurance, and the new disruptive trend in fintech. When you combine two major disruptive shifts (fintech and the gig economy) the results are game-changing.
The Fintech Disruption: The picture we can already see
Fintech is an umbrella term for an array of new financial sector services that were once monopolized by large financial institutions. This is a good thing. The change is forcing traditional banks to adapt and may even keep those pesky banking fees to a minimum!
Goldman Sachs predicts these fintech startups will capture as much as $4.7 trillion in annual revenue from traditional financial companies and $470 billion in profit.
These fintech companies include budgeting platforms such as Mint and Acorns, automated investing services such as Betterment or lending services such as Lending Club, OnDeck and Kabbage. What these companies are accomplishing is the decentralization and democratization of financial services like loans, banking and investing.
These fintech companies are making traditional services more accessible to consumers. Remember, the gig economy — or what some people term the “sharing economy” — is all about access.
See also: ‘Gig Economy’ Comes to Claims Handling
The Role of the Gig Economy in Fintech: Flexible workforces
In the gig economy, intermediaries disappear. But don’t ask me — ask your local taxi owner, hotelier or car rental agency if Uber, Airbnb or Turo have affected their way of doing business. This is a rhetorical question; of course there’s been an effect. This is a good thing, but how we react will define our businesses in the years to come.
When discussing what fintech means for the traditional finance industry, Barry Ritholtz, a Bloomberg columnist, aptly said: “What is much more interesting to me is how the traditional money-management industry will respond to and adopt the latest technologies for helping it operate more efficiently and with greater client satisfaction.”
This flexibility is something most industries, including the financial sector, have yet to fully embrace. There are a number of gig economy companies out there that have access to thousands of on-demand workers who can perform a number of tasks that were traditionally in the wheelhouse of full-time employees.
Why would an insurance company or other large financial institution have tens of thousands of employees across the country to verify assets when they can leverage a stable of trained, vetted and professional gig workers? This is the gig economy, where people with spare time are self-identified as willing to complete on-the-ground tasks in their location.
See also: The Gig Economy Is Alive and Growing
Gig economy companies aren’t just a vendor service — they can be part of the process. Need we get into the amount of money this can save a company?
Let’s dive into a specific sector of fintech — online lending — as a case study of how the gig economy can enable and complement the lending process.
Gig Economy Case Study: A flexible workforce and online lending
Online lending, including peer-to-peer lending, is an old concept reinvented for a digital age. Entrepreneurs, business people and citizens have always borrowed and lent money, but only in recent history has that become much more sophisticated and accessible through online marketplaces and fintech services.
Foundation Capital predicts that more than $1 trillion in loans is expected to have originated through these new lending marketplaces by 2025. Let that number sink in for a second.
Indeed, fintech has enabled a safe lending environment between people and businesses through innovative screening and credit checking. Investors and businesses of all stripes can now lend and borrow through internet platforms without traditional bank applications or even the need to physically exchange documents.
In most of these cases, however, asset or document verification are still requirements.
Take, for instance, common financial loan transactions, such as vehicle financing or refinancing, property financing and business loans. All these transactions require some form of physical verification that an asset exists and is “as described.” Whether that is a car, property, business or some other assets, someone needs to fulfill lending requirements.
Gig economy companies such as mine, WeGoLook, have access to thousands of workers across the U.S. who are ready and trained to travel to a specific destination to complete asset verification tasks.
The Gig Worker Landscape: What that means for fintech
Technology allows us to direct our “lookers” to capture the correct on-site data and perform tasks in a consistent manner across the U.S. (and now in Canada, the U.K. and Australia). The benefits of this gig model are numerous, and a looker, or gig economy worker, can now:
- Replace multiple vendors;
- Augment or supplement employees in the field;
- Augment, supplement or replace employees dispatched from a bank to verify assets or perform a task;
- Provide faster task completion at a lower cost; and
- Capture and store all data in the same place and format.
For an example of a real estate report we provide to many of our banking clients, click here.
Because of the flexibility inherent in gig work, there is a significant increase in flow of information to clients. For instance, companies like mine can provide an electronic “live” report, which allows clients to review photos and information prior to receiving a traditional report.
There is also the ability to support video, enabling a walk-through of a property, a demonstration of a piece of equipment in operation — and much more. This walk-through can also be done live with the client, if needed.
In the past, a customer would need to bring documents to a bank and work face-to-face with a branch employee for notarization and paperwork completion. This is no longer the case.
Gig employees can now immediately travel to the customer’s home or place of business. The gig worker can take photos of the asset, deliver documents, notarize originals, deliver them to a shipper and submit all relevant information via an electronic report.
This allows the bank to view all information and verify all documents are properly signed. The bank can then fund a customer before the FedEx or UPS package of original documents arrives.
See also: On-Demand Economy Is Just Starting
All this flexibility allows for faster turnaround times, the elimination of multiple vendors and a reduction in lag time waiting on a customer to try to get to the bank during business hours.
In the end, what we have is a smarter and faster process, which is important, particularly when a loan rate guarantee is in place.
Changing entire industries takes time, but the gig economy and fintech are rapidly altering the landscape of the traditional finance industry. As discussed, all three of these industries aren’t mutually exclusive. Traditional financial services can embrace the better use of technology through fintech and greater efficiency through the gig economy.