Whether it’s driving with Uber, freelance writing through Upwork or any of the other countless independent jobs the internet has enabled, the gig economy is changing how people work and make a living. In fact, according to a 2016 McKinsey study, between 20-30 percent of the working age population (more than 160 million people) in the United States and European Union have some kind of independent work. As the popularity of these services grows, it’s certainly likely the number of people taking on these opportunities will expand as well.
But there are implications for those who have jobs outside the traditional workplace. There’s the expected issues like no retirement savings account, paid vacation or possibly health insurance. Then there are issues that might not even occur until they’re faced with them. Perhaps the biggest one of all has to do with securing credit.
As anyone working within the gig economy knows, pay is subject to how much you work during any particular time period. One week could be quite lucrative while the following week could be the exact opposite. Another real scenario is that gig workers might have five or 10 sources of income rather than one specific employer. For banks and institutions that offer credit, this lack of consistency can be cause for concern when it comes to issuing a loan or even a mortgage. Many of these entities require two years or more of pay records from a particular employer as a condition of issuing a loan. Obviously, for those in the gig economy, that’s not a realistic scenario.
As McKinsey noted in their report, “access to credit” is a challenge that needs to be addressed and “could make independent work a more feasible option for individuals.” If an institution does offer credit, chances are it’s going to require things like a higher down payment, higher interest rates or both. This issue is exacerbated by the fact that 45 percent of those gig workers aren’t getting paid on time, this according to a recent Bill.com survey of 1,400 U.S.-based freelancers.
Just as technology is enabling change for those seeking job opportunities with greater flexibility, it is also delivering solutions to those who face credit issues as a result. One such company that’s focused on this need is Colendi.
The microfinance-focused credit scoring solution is able to improve credit access to precisely this audience. By using a wide variety of factors to determine a user’s credit score, Colendi is able to help people get access to microloans without having to play by traditional credit bureaus’ stringent rules. Colendi does this by processing smartphone, social media, transactional and more data points through a machine-learning algorithm built on the blockchain. Recognizing the importance of data privacy, users are in control over who can have access to their credit score.
This new way of calculating credit scores make it possible for gig workers to see some of the same key benefits of credit without sacrificing their career priorities. At Colendi, just like those firms enabling the gig economy, we are taking a nontraditional approach to helping people achieve their personal and financial goals – bringing down barriers and opening up opportunities for everyone.