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Gig workers expect faster payouts. With embedded finance, you can help them manage their cash flow—while generating engagement, retention, and revenue.
Last updated:
July 24, 2024
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9 minutes
Today, 36% of American workers identify as gig workers—up from 27% in 2016. By 2027, more than half the workforce will be gig workers.
Increasingly, these workers expect to be paid on demand. The reason is simple: when cash is tight, waiting 2-5 days to get paid out via ACH is unacceptable.
In fact, nearly 80% of gig workers report having less than $500 saved for an emergency. Close to 90% say they would choose one gig platform over another if they could get paid out instantly, with no fees.
That’s why leading gig-economy platforms like Uber, Instacart, and Lugg now offer instant payouts. When their workers have completed an assignment, the funds can be accessed in their bank accounts within moments, either automatically or via a button in the app.
There are several ways to offer instant payouts, including same-day ACH, dedicated vendors, and FedNow. But these solutions are challenging to implement, and they all function as cost centers rather than revenue generators.
By contrast, embedded finance enables instant payouts in a way that generates revenue—as well as engagement, retention, and valuable customer data.
If you’re a product leader at a gig-economy platform or marketplace who’s thinking about how to pay your workers faster, this guide is for you. In it, we’ll explain:
By offering embedded finance, you can solve problems for your workers that aren’t easily addressed by traditional banks.
This can be particularly impactful for gig workers, many of whom are underbanked. By providing them fast and simple access to a bank account, you can deepen your relationship with them—making your product stickier.
Gig platforms that offer embedded finance can also provide:
Instant payouts aren’t just valuable for your workers. They also generate the following benefits for your business:
Finally, embedded finance creates new opportunities for re-engaging your workers. As an example, let’s say that a worker has a $1000 rent payment coming up, but there is only $800 in their account. You could let them know how many hours they need to work to make up the difference.
To illustrate how it works when a gig economy platform offers embedded finance, let's use a real-world example: Veryable.
Veryable is a platform that connects gig-economy workers with contract labor opportunities at warehouses and fulfillment centers. Veryable’s contractors wanted faster access to their money, and Veryable leapt at the opportunity to help them.
After they launched embedded bank accounts with Unit, Veryable could easily pay contractors within 24 hours of completing a work opportunity—even on holidays and weekends.
Say a contractor completes a work opportunity at a warehouse. Veryable provides the instant payout from their operational account; the funds become available in the contractor’s Veryable Vault account the next morning. Once the original payment from the warehouse has settled, Veryable recoups the funds.
Since they’ve started offering instant payouts via embedded finance, Veryable has seen sharp increases in engagement, retention, and revenue: they’ve doubled the number of customers on their platform while tripling revenue from card purchases.
To illustrate what embedded finance could look like on your platform, let’s use an example. Say you’re the VP of Product at Alfalfa, a platform that enables people to order organic produce and groceries and have them delivered.
Here's what embedded finance could look like. (To get a closer look at Alfalfa, check out our live demo.)
Once a worker completes a work opportunity, they could tap a button in their Alfalfa Wallet to instantly access the funds in their embedded bank account.
Alternatively, you could arrange for them to be paid out automatically, within seconds of completing a job, as Uber does. In some cases, you may even be able to charge a fee for this convenience. For instance, DoorDash charges a small fee to receive payments on-demand instead of weekly.
Credit, debit, and charge cards are a convenient way for your workers to get paid and spend money. Cards can be offered in virtual or physical form.
Virtual cards are particularly appealing because your workers can start spending with them as soon as they’re issued. They’re also highly programmable; for example, you could allow workers to set a weekly spending limit to help them manage their personal finances.
When you offer your customers embedded bank accounts, you gain visibility into all of their account activity—while also generating revenue from it.
Your workers could access embedded bank accounts via a tab in the Alfalfa app. To differentiate your product from traditional bank accounts, you could offer more detailed information about income and expenses; for example, when income was earned and for which job.
Cash advances are a popular form of lending offered by gig-economy platforms like DoorDash and Toast.
With cash advances, you purchase a portion of your worker’s future revenues in exchange for early access to funds they expect to receive in the near future. Cash advances can help your workers access needed funds while unlocking a powerful revenue driver for you.
For many gig-economy workers, cash is a primary way to pay and get paid. So it's important to give your workers a way to access cash with their embedded bank accounts.
At Unit, we’ve partnered with Allpoint Network to offer fee-free ATM access at over 55,000 ATMs. We also enable end-customers to search for nearby ATMs.
Once your workers get paid, you can make it easy for them to understand what they may owe in taxes.
For example, you could provide an opt-in feature that automatically deposits the appropriate amount into a dedicated “tax account” whenever your worker gets paid.
Targeted rewards programs can set you apart from competitors, drive engagement, and increase retention. Uber does this to great effect with the Uber Pro Card; for example, drivers can earn up to 10% cashback on gas.
Your workers depend on apps like CashApp and Venmo; embedded banking makes it simple to integrate with them. You can also integrate with platforms like Hurdlr and Quickbooks, which help gig workers more easily manage activities like bookkeeping and taxes.
Besides instant payouts, you could support payment methods like same-day ACH, check payments, push-to-card payments, and international payments. For example, your workers may prefer to pay their rent via check; with embedded finance, it’s easy to offer them this functionality.
When considering whether and how to launch embedded finance, many tech leaders are curious about the up-front investment.
As recently as five years ago, it required years and millions of dollars. But with recent advances in technology, it’s now possible to launch embedded finance in weeks.
Unit is an embedded financial infrastructure platform that helps tech companies build accounts, cards, payments, and lending into their products.
That means we help gig-economy platforms like yours launch instant payouts, banking, and lending. To date, nearly 200 leading platforms and marketplaces have trusted us to help them build and scale their programs.
Unit is also the only platform to offer White-Label Components—a suite of fully customizable building blocks—so you can easily build and control your frontend with minimal engineering resources. We streamline compliance requirements and bank relationship(s) so you can stay focused on scaling your business.
If you’re thinking about how instant payouts can help you better retain and engage your workers, please reach out. We’d love to brainstorm with you.
Originally published:
September 5, 2023
Frequently asked questions
If you know when and how much your workers are getting paid, you’re in a great position to offer instant payouts.
Modern payment processors (and many other kinds of companies) allow you to programmatically access this information via API. As soon as the payment is initiated, you can arrange to be notified via webhook.
The result is that, rather than waiting 2-5 days for the funds to land in their bank accounts, your workers can access them right away—either automatically, or via a button in your app.
Yes, you can offer multiple accounts with Unit. For example, you could provide your customer with one account for routine business expenses, another for tax withholding, and a third for cash reserves.
Accounts can be created for businesses, sole proprietorships, and individuals. Each will have a unique set of account and routing numbers.
Instant payouts are still a differentiator; the majority of gig economy platforms still do not offer them. By adding this functionality now, you can still set yourself apart.
However, it’s true that instant payouts are quickly becoming table stakes. As more platforms add this functionality, late adopters will be forced to play catch-up rather than build their competitive advantage.
Sourcing the operational capital to fund instant payouts typically comes from one of these places:
Check out our guides page to learn more about embedded finance
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