How can you help your members survive the Gig Economy?
posted by Eric Schurr on Tuesday, August 1, 2017
The gig economy is growing fast, and credit unions have an opportunity to become an invaluable partner to the millions participating in the gig-based workforce. A “gig” is defined by three criteria:
- High degree of autonomy
- Pay by task,
- Short-term relationships between worker and client
McKinsey estimates 27 percent of the U.S. working age population is composed of freelancers workers. That translates to as many as 68 million independent workers. How many of these individuals are credit union members? How many more would be if credit unions evolved to serve their specific needs?
Many in the gig economy appreciate the positives of their unique careers while acknowledging and managing through the negatives.
Freelancers who operate in this environment like the freedom that comes from choosing only those projects they enjoy. They appreciate the flexibility to schedule work around their lives, the chance to try several types of jobs and the ability to pursue their passions and interests. On the other hand, these individuals deal with the inherent uncertainty that project-based work brings. Indeed, workers in the gig economy are missing two types of financial protections their more traditional counterparts enjoy.
Many independent workers lack access to income security protections, such as unemployment insurance, workers compensation and disability insurance. All is well until it isn’t. An unexpected medical, car or household expense can produce immediate financial strain.
The second is income instability. Gigs often produce irregular payment periods, and when combined with fluctuating amounts in each of those periods, the burden can be significant. Though income is adequate, cash flow issues stemming from irregular, fluctuating income streams create the need for short-term, small dollar loans. The payday loan industry was built on this need, growing from $10 billion in 2001 to $48 billion in 2011. Pew Charitable Trust reports payday fees and interest totaled $7.4 billion in the U.S. in 2011.
So what does this have to do with your credit union? In a word, tons. With 100 million credit union members across the nation, there are no doubt millions making a living from a gig, possibly two or three patched together into one career. The opportunity to assist with income stability and protection is sizable.
Notably, credit unions already have a product in their arsenals that provides a low-cost, short-term, small-dollar loan. That’s the credit card. There are countless ways to configure and market a credit card product to freelance, contract and temporary workers. Doing so has the potential to not only solve their problems, but to elevate your credit union to “hero” status for this growing and influential segment of the marketplace.
If your membership is indicative of the U.S. population, over one in four of your members are living in financial insecurity and look to you to help them achieve financial well-being. Having a credit card product crafted around this segment could be your ticket to filling the void.
Need help concocting the perfect product mix to fit your members? Our team of credit card experts would be happy to help. Learn more about us here or shoot me an email at firstname.lastname@example.org.
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