San Francisco, July 26, 2018—There’s no getting around it. The modern economy is moving to a freelancer model — and fast. You’ve seen the numbers. The freelance economy is expected to grow to 43% of the U.S. workforce by 2020, and freelancers already contributed $1 trillion to the U.S. economy in 2015.
A recent survey from Hyperwallet found that only 19 percent of respondents wanted to work set hours though 50 percent of respondents currently do. The reality is that many more workers would embrace freelance employment if the opportunity was available and the pay and benefits were comparable to full-time openings.
Yet, despite the app-based Gig Economy’s reputation for being cutting edge, it is built on the payment processing technology of past decades and for an economy built on full time employees.
“Right now, everyone is paid every two weeks,” said Kashif Siddiqui, head of payments Cross River Bank, at a payments event hosted by Tearsheet in Fall 2017 (via FinTech Unltd). “That doesn’t really work for shift work, for the gig economy.”
“Data overwhelmingly show that Gig Workers and freelancers would like to be paid more quickly, and they will certainly flock towards On Demand platforms that provide this service.”
For a transaction to take place using today’s payment processing model, a company must first verify each party’s identity and available balance between secure, centralized servers. This can take days and cost a significant percentage for each transaction to be verified and completed, assuming the payment is approved. There is often a flat rate per transaction as well, incentivizing employers to wait to pay contractors in order to bundle payouts together.
Because of this, it takes many On Demand platforms days or even weeks to pay their freelancers.
Some large companies are able to bypass these wait times by paying out contractors from their own funds before the payment is processed. But this requires a large pool of cash on hand and forces the company to bear the risk of the payment being cancelled for any reason. These barriers prevent all but the largest companies from being able to offer quick payouts to contractors they employ. Even for companies with enough capital to do so, the extensive cost in resources and risk often leads them to charge contractors for the service.
More than three-fourths of workers say a delayed paycheck would impact them, with half saying that they would need to delay payment on important bills and more than one-third saying they wouldn’t be able to buy essentials like gas and groceries, according to the Hyperwallet Survey. These delays are more common for freelance workers than full-time employees. But, what is a major issue for freelancers now will become a major issue for On Demand companies that don’t adapt before long.
Utilizing Thor’s Lightning Pay™, On Demand companies will be able to pay their contractors near-instantaneously without holding massive cash reserves and bearing the risk of non-payment.
“What is a major issue for freelancers now will become a major issue for On Demand companies that don’t adapt before long.”
This allows small and medium-sized companies to offer instant paymentswhile also allowing large companies to replace their same-day payment programs without the outsized costs. All of this is possible because of blockchain’s distributed ledger, which allows transactions to be verified within a matter seconds while not simply maintaining, but improving upon the security and integrity of previous models.
But, realizing blockchain’s full potential for facilitating rapid, secure payments will require greater adoption of cryptocurrencies by both companies and contractors. Because of this, Thor will offer a centralized version of our Thor Lightning Pay™ product that can be used by companies and contractors in the near-term while maintaining readiness for the decentralized model as soon as it can be implemented.
Data overwhelmingly show that Gig Workers and freelancers would like to be paid more quickly, and they will certainly flock towards On Demand platforms that provide this service. This makes it imperative for these platforms to adapt to near-instantaneous payment systems as they are consistently required to attract and retain new freelancers to run their business.
The decision is clear. On Demand platforms will need to implement fast payment systems like Thor Lightning Pay™ or lose their contractors to platforms that do.
It’s time for these platforms to embrace the payment processing technology of today — or be gone by tomorrow.