Voice of the Industry

Global payment trends shaping the freelance economy in 2021 and beyond

Thursday 10 March 2022 09:24 CET | Editor: Raluca Constantinescu | Voice of the industry

Michelle Swiec, Senior Director of Payments Strategy & Operations at Upwork, elaborates on global payment trends, such as faster payouts or embedded financial services, that shape the freelance economy

COVID-19 expedited the normalcy of remote work and accelerated the move for many workers from typical full-time employment to contract, freelance, and ‘on-demand’ employment. As a result, the freelance economy has experienced rapid growth year over year, attracting a variety of players to enter the space and offer their solutions to ease pain points. Payment companies are no exception and have been leveraging existing payment industry trends to make their mark on the freelance economy and mould its new normal. 

Faster payments: setting freelancer expectations 

In today’s world, the ability for work marketplaces to offer instant or faster payouts is now table stakes. Freelancers, on-demand skilled workers, and other independent professionals expect the scale and flexibility to be a two-way street: they expect to be paid quickly and, increasingly, more frequently. Much of this expectation is rooted in the fact that more and more of the larger gig work platforms offer these benefits as key differentiators against their competition, and thus, set the tone for peers in other on-demand segments. There’s also an increased need for freelancers to be paid quickly due to personal finance considerations and uncertainty in economies the world over. 

The proliferation of faster payout solutions such as the ones below is having a lasting impact on freelancer expectations, causing marketplaces to look for pre-built solutions to meet demand: 

  • Push-to-Card or Push-to-Account payments: solutions such as Visa Direct and Mastercard Send are being leveraged by some of the top gig platforms like Uber and Lyft and are being offered by Moneygram and KyckGlobal to provide instant disbursements to workers. 

  • Digital wallets: instant disbursement directly to a digital wallet (e.g. Tencent Pay, GrabPay, Paytm, Payoneer, PayPal) continues to gain popularity as the usage of digital wallets grows globally. 

  • Real-time payments: though still trying to catch fire in the US, real-time payment networks (e.g. UPI in India, Faster Payments in the UK, Pix in Brazil) are rapidly becoming the next rails enabling real-time payments to on-demand workers and freelancers. 

Single APIs enabling cross-border payments: increased payout variety 

The ability to disburse globally without the complexity of integration with multiple providers has not only enabled marketplaces to grow and scale quickly from domestic-only to international, but it has also surfaced increased payout options. 

Providers such as Payoneer, KyckGlobal, Mastercard’s TransPay, and PayPal’s Hyperwallet power some of the largest (and smallest) global marketplaces in making cross-border payments through a single API, offering choice in how workers get paid: 

  • Direct to local bank (international ACH): this cross-border payment method involves intermediary networks, where earnings are deposited directly into the user’s local bank account. 

  • Wire transfer: an electronic payment service transfers funds to and from accounts through the SWIFT network, FedWire, or other systems, and it typically involves correspondent banks. 

  • Push-to-Card or Push-to-Account: mentioned previously, this disbursement method sees users providing card or account details and funds being moved across the major card brand networks into the user’s bank account. 

  • Digital wallets (including crypto wallets): these electronic payment systems allow the user to receive and store funds in order to make online or in-store purchases from anywhere in the world. 

Embedded financial services and value-added services: getting more done 

For some time, on-demand workers have been underserved and undersupported by the financial services industry due to the lack of historical data and variable incomes. However, embedded financial services are now enabling marketplaces to make financial solutions available to workers at affordable prices. Products such as debit cards, income smoothing, and payment advances are all being leveraged by global marketplaces like Grab. 

Furthermore, over the past year and a half, new value-added services have been developed by companies entering into the freelance economy to support these independent professionals who also often view themselves as small business owners. Services including invoicing, project management, and accounting/bookkeeping empower owners to better manage and scale their businesses. 

Regulation: implications of licencing or out-of-the-box solutions 

Payment regulation that has long burdened payment companies is beginning to rear its ugly head for marketplaces, which at the end of the day, facilitate payment transactions among their users. As a result, an increasing number of marketplaces have pursued various payment licencing (e.g. money transmitter licences in the US, payment institution licences in Europe) to ensure compliance and payment flexibility. Examples of those proactive marketplaces include Amazon, Airbnb, Booking.com, and Grab. 

On the other hand, licencing can be a complex endeavour, so smaller and newer marketplaces are leveraging out-of-the-box solutions such as Stripe Connect, Braintree Marketplace, and Adyen Marketplace. However, many of these out-of-the-box solutions are relatively new to market themselves, and they do not yet have the global coverage required to meet certain marketplace needs. 

The view ahead: payments and the freelance economy remain intertwined 

Like many forms of innovation, the freelance economy and expectations of on-demand workers have symbiotically and simultaneously both influenced and been influenced by the payment industry in terms of implementing faster payments, cross-border disbursements, embedded financial services, and compliance-cleared solutions. Although the trends continue to evolve rapidly, it’s clear that both industries will be corresponsive and interdependent for the foreseeable future. 

This article was first published in our Cross-Border Payments and Ecommerce Report 2021–2022, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally. 

About Michelle Swiec 

Michelle Swiec is a payments aficionado and evangelist with more than a decade of experience in the financial services and payments space. At Upwork, she leads the P&L and overall strategy for payments. Prior to joining Upwork, Ms. Swiec worked in strategy consulting at KPMG. 

About Upwork 

Upwork is the world’s work marketplace that connects businesses with independent talent. We serve everyone from one-person startups to 30% of the Fortune 100 with a powerful, trust-driven platform that enables companies and freelancers to work together in new ways that unlock their potential. Our talent community earned over USD 2.5 billion on Upwork in 2020 across more than 10,000 skills in categories including website and app development, creative and design, customer support, finance and accounting, consulting, and operations.

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Keywords: Upwork, digital wallet, payout, real-time payments, cross-border payments, ACH, regulation, freelancing
Categories: Payments & Commerce
Countries: World
This article is part of category

Payments & Commerce