The great unbundling of the labor market

February 28, 2023

Our role at Impact Ventures is to identify the disruptive trends happening today that will shape the next generation of fintech and commerce. While the labor market might not seem like the most obvious area of disruption, over the past few years, we have experienced a profound and long-lasting shift in the workforce.

We have moved from the traditional mindset of “one job, one company” to a new age of “fractional employment” where workers choose their own hours and employers. This rapidly growing segment of the labor force – often called gig workers – has gone mainstream with technology playing a significant role in that growth. In the United States alone, an estimated 36% of the adult workforce today is represented by this segment. That’s 58 million people.

And gig working isn’t just about our Task Rabbits, Lyft drivers or DoorDash deliveries. It has extended into almost every part of the workforce from web designers to musicians, even C-Suite executives. This “great unbundling” brings new opportunities as well as challenges. Companies now have a new way to access flexible labor, either through their own platforms or those of partners. Meanwhile, workers enjoy both greater flexibility and non-traditional ways to leverage their expertise.

So why does this matter for FIS® and our customers?

This new way of working requires a new way of banking, buying and lending. Gig workers have different financial needs such as access to pay advances to even out inconsistent income or early access to wages that have already been earned but held until the next paycheck. They have more complex personal financial, tax, insurance and expense management requirements, especially if they are hired through more than one platform. Then there is the need for affordable lending with gig workers underserved by traditional credit scoring methodologies.

Alongside these challenges, the opportunity space for financial institutions is growing. There is a range of investible startups who are working to solve these needs and have identified the white spaces to pursue new business models.

For lending, there is an opportunity to use alternative data sources to evaluate the credit worthiness of a wider range of workers and through more streamlined payroll access that can allow lenders to get a better view of potential customers. Each approach could expand the loan market without increasing the risk to lenders. These are complex markets but with large, under-served populations that are often relegated to the sub-prime lending market today.

For insurance, gig workers may benefit from fit-for-purpose products that take into account different types of needs, from liability to auto. But risk assessment and brokerage models may need to evolve.

And for banking, there will be opportunities to build the infrastructure that will empower gig work platforms to provide sophisticated financial services themselves.

The gig economy has brought significant changes to the labor market over the past decade. No longer solely the purview of low-paid, on-demand workers, this sector is becoming increasingly sophisticated and impacting multiple industries. Who knows, maybe all of us will eventually become the gig workers of tomorrow.

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