Before the pandemic hit, the global freelancing economy was expected to experience significant proliferation.
Today, while shutdowns have led many businesses to temporarily halt non-essential spending, many in the market actually expect the expansion of the freelancing community to accelerate as a result of market volatility.
One factor behind that thinking is certainly the sudden jolt of job losses, guiding many professionals once reliant on hourly or salaried employment to step into the world of gig and contract work.
But there’s another driving motivator behind the growth of the global freelancing economy, according to Payoneer Vice President Americas, Regional Head, SMB Iain McNicoll, and Vice President, Regional Head, South East Asia Miguel Warren.
In an interview with PYMNTS, both McNicoll and Warren discussed the impact of the pandemic on the freelancer economy, and the opportunities for freelancer marketplaces to promote trust for both hiring companies and freelancers, plus introduce value-added offerings to support cash flow for independent professionals. Payments are key to the trust equation, particularly when hiring expands across borders. But, they said, if compensation workflows break down, trust can quickly erode.
Expanding The Talent Pool
As the PYMNTS Gig Economy Tracker noted earlier this year, freelancers are set to make up more than half of the U.S. talent pool by 2028. It’s a global trend, though, and one McNicoll said has likely been aided by the global pandemic.
“The pandemic may actually accelerate the growth of freelancing,” he said. “At least in the U.S., there’s a high level of unemployment, and a whole new population that no longer has the desire to work in a congested city.”
But corporates themselves are also supporting the expansion of this “digital nomad” ecosystem, as McNicoll described it. Remote working has opened up many businesses’ eyes to the opportunities and value in hiring professionals regardless of where they are physically located, with freelancing offering a particularly flexible way to add talent on-demand.
Similar patterns are emerging in Southeast Asia (SEA), too, according to Warren, with many employers in the Western world turning to the region overseas for talent that often comes with less overhead than hiring locally.
“As this concept gains traction, it’s inevitable that a lot of companies will start to augment their workforce with more freelancers and contractors,” he said. “And not just from the same country, the same city, but even from other countries where the talent and the skill sets are available.”
Online freelancer marketplaces have razed many barriers to hiring these professionals across borders and will continue to be an important part of fostering growth in the freelancer talent pool as businesses adopt a hybrid approach of both traditional and freelancer workers to their hiring strategies moving forward.
Fostering Trust Through Payments
Key to these marketplaces, both McNicoll and Warren highlighted, is trust.
For companies, these platforms allow quick access to pre-vetted professionals, cutting down significantly on time spent manually searching for qualified candidates with reputable backgrounds. Freelancers themselves, meanwhile, gain the opportunity to become more easily searchable and attract employers that are similarly trustworthy.
Yet as these hiring trends expand into a global market, opportunities for friction grow, especially when it comes to compensation. That can spell a recipe for eroded trust.
“The safety of funds is very important between the employer and the freelancer,” said McNicoll. “Sending funds overseas, especially for the U.S., can be somewhat of a new experience.”
Hiring companies need to be able to seamlessly pay freelancers in their local currency and give those professionals options on how to gain access to earned wages. Yet high fees, a lack of transparency, and sluggish workflows can be a headache for hirer and freelancer alike.
McNicoll and Warren pointed to the opportunity for companies like Payoneer to offer a closed-loop system that protects funds while accelerating payment and offers both sides of the transaction options in how they send and receive money.
In markets like SEA, connecting freelancers to their funds as quickly as possible is vital to the overall health of the freelancing community. Additionally, when freelancers look to grow their teams to address larger, more complex projects, or expand their service offerings, they often struggle to manage cash flow. Freelancing itself is often a very irregular business, and taking on more fixed expenses like salaries for workers is a big challenge to manage. However, many successful freelancers are in high demand, and they quickly recognize the opportunity to meaningfully increase their earnings by investing in the future of their business.
That said, freelancers and contractors typically don’t have the same opportunities as traditional businesses in terms of accessing working capital. Many financial institutions still struggle to underwrite loans for these sorts of borrowers as they may not fully understand the business model. Warren noted that traditional lenders also tend to have highly manual, paper-based loan approval processes which are slow to meet needs. As such, these freelancers and contractors in SEA often look to informal lenders that charge extremely high rates, sometimes as high as 5 percent per week. This opens up an opportunity for freelance marketplaces and partners to introduce value-added services to help these workers get the funds they need to grow their business.
“Freelancers and contractors don’t have the same kind of opportunities as traditional businesses in terms of accessing working capital,” he said.
Although solution providers like Payoneer can foster trust by reducing freelancer payments friction, value-added services can further accelerate the growth of this talent pool, and, Warren added, enable developing and developed markets alike to embrace a new generation of the workforce.