How Real Time International Payments May Save the Gig Economy in a Post Pandemic World
Due to the freedom and flexibility the gig economy provides, it is at the pinnacle of success today. The representatives of this area can work whenever they want and do whatever tasks they want to do. The gig economy benefits include the prevalence of freelance opportunities, the capability to pursue multiple careers, to maintain a passion project part-time, and combine work with traveling. All these make the gig economy very attractive and lucrative for freelancers.
As the gig economy develops, the demand for real time international payments also grows. Unfortunately, the recent pandemic of COVID-19, influenced every sphere of our life, and the gig economy is not an exception. The biggest concern is the payment question. According to a survey, 73% of gig economy workers are ready to leave this market because of frequent payment issues. Unfortunately, gig freelancers can’t be paid instantly. Sometimes, it takes weeks until they are paid for their work. And this is where US real time payments may be a game-changer.
The Clearing House, a well-known banking association, released its real time payment network in 2017. Today, it covers more than 50% of transactions in the USA. However, in making real time payments in US more accessible, a lot depends on partnerships. For example, PayFi and The Clearing House have recently announced a partnership to introduce this technology to the community banks.
It goes without saying that the development of the gig economy depends on real-time payments. Gig workers are going to be more productive if they get payments faster. It is expected that in a few years, freelancers will make up the majority of the US market, but the question of timely payments still remains an issue.
Unified Payment Interface: US Real Time Payments
To solve the issue related to web development payment processing, the US Federal Reserve announced a year ago that they were planning to develop “FedNow” – a real-time payment service. The initial plan was to release this tool in 2024, but we are all hoping that the pandemic might make them change their schedule and try to launch this tool as quickly as possible.
Google demonstrated a successful example of a UPI, or Unified Payment Interface – a powerful and multi-featured system that allows users to have several bank accounts in one single mobile application. Simply put, it unites a few banking options and merchant payments in one tool.
Let’s review the key characteristic features of UPIs:
- Interoperability. Thanks to this option, users can easily transfer cash from their payment service provider to another bank account (no matter what PSP the other party uses).
- Real-time money transfer. We all know that more and more people are using smartphones instead of physical cards to pay for products and services. The new system should provide the option that allows users to authorize any payment using two-factor authentication. In this case, a person can transfer funds instantly without the need to use Visa or Mastercard as intermediary services.
- Open system. Today, we understand that various payment rails require different types of authentication information. In such a scenario, the new system should simplify everything. In other words, it should be an open infrastructure that will be suitable for all modern technologies.
It goes without saying that all these qualities can definitely change the gig economy for the better.
What Are the Gig Economy Benefits from Using Real Time Payments?
So, how do real time payments work? They combine a variety of features: fund availability, instant confirmation of payments, settlement finality, etc. And the payment is made just in a few seconds. The main goal of Real Time Payments is to bring speed, data, and communication together. As a result, fast payment options will encourage more freelancers to participate in the gig economy.
But what are the main benefits for entrepreneurs? Indeed, they also benefit from using RTP. When employers hire short-term specialists, they can save on costs. Simply put, there’s no need to pay for healthcare, extra labor costs, etc. When using the right payment options, they can forge better relationships with their remote employees.
Moreover, fast digital payments increase the profits of employers by making financial transactions with clients cheaper, faster, and more convenient.
Small business owners win the most from such payment options. Currently, they have to wait for a few days until a paycheck is deposited. FedNow is working on developing new opportunities for small FinTech companies. In the near future, they will be allowed to create their own versions of PSP apps. As a result, small FinTech companies will be able to utilize infrastructure to comply with the demands of their clients. In other words, they will be able to develop fast, user-friendly, and safe solutions that can meet the needs of their clients and compete with the solutions of larger banks.
Overall, we should agree that the gig economy effects influence a number of areas. Even in a post-pandemic world, real time payments allow lots of small companies to stay afloat. Freelancers are paid faster, and entrepreneurs can save on costs by hiring short-term workers. It goes without saying that faster access to funds boosts both productivity and morale.