Attention, Fintech Entrepreneurs: These Are the Banking Features Independent Workers Really Want There's a massive opportunity for entrepreneurs to build startups that serve independent workers.
By Trent Bigelow Edited by Amanda Breen
Opinions expressed by Entrepreneur contributors are their own.
Independent workers are tired of being an overlooked market. They're unhappy with banking tools that don't fit their needs and want features that can solve their pain points. Isn't it about time to cater to this growing market?
The independent economy is booming, and the current 68 million freelancers, gig workers, contractors and on-call workers are expected to grow to 90 million in just seven years. Additionally, 49% of full-time workers are looking at leaving their current jobs for independent work.
Yet in our recent report on "Banking the Independent Economy," we found that independent workers are unsettled with their banking options. Half report that they're not fully satisfied with their bank in general, and 68% plan to look for an entirely new bank in the coming year. Where does this dissatisfaction come from? And how can challenger banks take advantage of this?
Unique needs of independent workers
Banks need to be aware of the unique needs of independent workers in order to better understand how to serve them, including how they differ from employed W-2 workers and the extra administrative tasks and financial management they tackle on a daily basis.
Our report found that only 51% of independent workers are "very satisfied" with their current bank. One of the top reasons they're dissatisfied is high fees — they don't want to be nickel-and-dimed on maintenance fees, overdraft fees and other costs. Poor customer service and lacking features also contribute to their dissatisfaction.
Related: The 'Great Resignation' Will Transform the Gig Economy. Are You Ready to Take Advantage?
We asked independent workers what they wanted to see in a banking app, and here's what they suggested.
Taxes
W-2 workers probably rarely think about the taxes coming out of their paycheck because their organization takes care of it for them. However, once independent workers receive their app payout, paid invoices, ecommerce sales or other sources of potentially very variable income, they have to calculate how much they would owe in taxes. They then set that amount aside and pay estimated tax payments quarterly to ensure that they're paying enough throughout the year so they don't get penalized.
Calculating owed taxes on income and setting aside that portion is a challenge for even the most organized independent workers, which is why they're looking for a bank account that can automate the process. From each deposit, take a percentage and store it away in a separate account for quarterly estimated taxes. An added bonus would be if the bank account could automatically pay those estimated tax payments as well.
Deductions and expenses
Because independent workers are essentially businesses of one, they also need to keep track of all of their business-related spending and which expenses are tax deductible — like conference costs, a laptop purchase and even printer paper. They also have to worry about missing expenses they could possibly deduct as well.
That's why independent workers want a bank account that can identify tax-deductible expenses, allowing them to keep track of what they can deduct at tax time or even to identify new deductions they didn't know they could take. They also want an account that can automatically categorize expenses so that they can keep track for budgeting, business planning and taxes.
Related: 15 Commonly Missed Tax Deductions | GOBankingRates
Other savings, insurance, etc.
W-2 employees also have the benefit of having retirement savings, health-insurance payments, transportation payments and more deducted from their paychecks. Independent workers need to arrange their own benefits, like retirement and health insurance, and pay their own contributions or payments themselves.
As a result, independent workers are looking for the ability to automatically set aside a portion of their income for other needs, like retirement savings, social-security payments, health-insurance payments and other expenses. Any bit of automation can help cut down on time and effort that could be expended elsewhere.
Business tools in general
Independent workers are not just working to earn a living: They're also their own HR and operations department and have to spend additional time and energy on administrative tasks and financial management that W-2 employees don't need to worry about.
Because of this, independent workers noted their desire for budgeting tools directly in their bank account and the ability to invoice directly. While there are third-party tools, independent workers want integration for easier management.
Related: The Rapid Growth of Fintech: A Revolution in the Payments Industry
Will banks act?
The independent economy is scaling, and independent workers are looking for new banking options that will help streamline their lives. Challenger banks can take advantage of this opportunity by offering mobile-banking apps with automation, categorization and identification of expenses and deductions, budgeting and invoicing tools, and more.
It comes down to not just offering a checking or savings account, but offering a comprehensive business resource specifically for independent workers to help make their lives easier.
