Creating Gig Economy Payments Trust Factor

FinTech is on the march, and one area where progress is highly visible is in the growing gig economy ecosystem. There, online platforms match workers with employers as payments become quicker and more digital and quicker — after all, gig labor becomes a better experience when those workers don’t have to wait too long for their wages, and don’t have to pay high fees to access instant payments.

But there are also other factors at play — among the main ones is consumer trust. In a new PYMNTS interview, Venu Javarappa, chief product officer at Qwil, a company that enables businesses to pay their contingent workforces instantly, talked about how to build and keep that trust as companies and the gig ecosystem itself are growing at a rapid pace. That trust is vital for all businesses, especially those that deal with workers’ paychecks.

The company is registered as a public benefit corporation, which means that in addition to striving to deliver profits to shareholders, the company has a “charter purpose” to provide some social good and meet high bars for transparency and legal accountability. Indeed, those are two big factors in ensuring consumers’ sustained trust, Javarappa said.

Inevitable Problems

The interview came amid fallout from another digital outage that impacted payments and millions of online customers. Earlier in October, news broke that online banking startup Chime was hit with an outage that left its five million customers with no access to their money. The outage lasted for at least 24 hours, taking down the company’s website and app, as well as shutting down customers’ debit cards.

According to Javarappa, that incident stands as a warning to other growing FinTech companies — a warning that amid all the growth, hiring, raising of capital, innovation and disruption, companies need to maintain a strong, sharp focus on security and consumer trust. After all, it doesn’t take much for an outage or breach to drain all credibility from a company, especially one operating in a fiercely competitive area like payments and commerce.

And make no mistake, he said — problems will happen.

“There is always a moment of crisis in a company’s history,” he told PYMNTS, “especially when you are dealing with sensitive data.” He offered several recent examples that go beyond Chime, and even brought up the problems and soured reputation recently experienced by Facebook stemming from its mistakes in handling data. Javarappa acknowledged that people remain on Facebook — especially given the lack of a real social media competitor — but said present appearances can be deceiving, and that Facebook’s ongoing success is not necessarily guaranteed, especially if more issues pop up involving consumer trust.

“People still use Facebook,” he said, “until they don’t.”

Companies these days have to communicate well with the public when it comes to issues of trust, and must stay true to their core values, he added. “Things break down, but how well do you communicate, and how well do you plan for those outages?”

Liquidity As A Service

Trust must always be a front-and-center concern for any company, especially one on a rapid growth trajectory as Qwil seems to be, given the hiring boom and other activities described by Javarappa. In general, the company operates in the increasingly trendy area of quicker wage disbursements, a part of the payments industry fueled in large part by the expansion of the global gig economy.

As Javarappa told PYMNTS, Qwil operates as a liquidity-as-a-service platform. They buy the invoice from the client, staffing firm or freelance marketplace and pay the freelancer or small to medium-sized business (SMB) a discounted amount determined by Qwil’s proprietary underwriting algorithms. The total fees charged by the company amount to a few percentage points — on average, roughly a 20 percent annualized charge. So far, freelancers accept offers to use Qwil and get advances about 40 percent of the time. Adoption is greater once it’s made clear that these are not payday loans with high-interest rates and fees.

Interestingly, according to the latest Pay Advances Playbook from PYMNTS, fees associated with pay advances are not a major deterrent. Fewer than one in five (14.6 percent) payday-dependent workers who are not interested in them believe they are too expensive. The biggest negative among payday-dependent workers (37.1 percent) and payday-centric workers (37.8 percent) is that using pay advances would restrict financial flexibility.

But growth is one thing — having contingency plans in place for outages and breaches is also important, as is investing in the training and redundancies that can result in better handling of those problems. “Everything is good until the moment it isn’t,” said Javarappa.