Independent Banker - February 2019 - 23

than a decade ago, the so-called
gig economy has gained massive
ground among the U.S. workforce,
especially among young
workers. Independent contracting
is on the rise. A Marist and
NPR survey published last year
estimated that one in five Americans
is a contract worker, a
population that numerous studies
predict will grow. And their
banking, payments and credit
demands do not always line up
with their salaried peers.
" As [our] bank's client base
continues to grow, so do the
number of independent contractors
we have as clients, "
says Joe Fazio, co-founder and
CEO of $653 million-asset
Commerce State Bank of West
Bend, Wis. " In fact, we've also
seen a similar uptick in the
outside resources we use at
the bank. Executive coaches,
management consultants, loan
review specialists, compliance
consultants and more are independent
operators of their own
businesses. "
A growing trend
A 2016 McKinsey Global Institute
study, Independent Work:
Choice, Necessity, and the Gig
Economy, found that 27 percent
of the country's working-age
population engages in independent
work. The majority-72
percent-are doing so by choice,
rather than out of necessity.
Among the senior citizens that community banks
already count among their most-valued customers
and the young consumers that banks want to
attract, this trend is even more pronounced. The
study found that 53 percent of working-age people
under 25 and 44 percent of those over 65 do
independent work.
And the trend is exploding. In her 2018 Internet
Trends Report, Mary Meeker, general partner
at Kleiner Perkins, predicted that freelance work
is growing at three times the rate of the total U.S.
workforce. However, given their uneven income
streams, demand for business-like products and
services, and a credit modeling system that does
not typically account for the positive aspects of
these gig workers, customers in this booming
market segment do not always feel well served by
their financial providers.
Ryan James, CEO of $125 million-asset Surety
Bank in DeLand, Fla., says the community bank
has seen a definite increase in consumer accounts
that have more than one source of deposits, typically
coming through a PayPal account or another
third-party gateway.
" All different types of consumers are now doing
freelance work, " he says. " We have school teachers
that also tutor through Skype nationwide.
Sales associates at mobile stores freelance as
graphic designers. Nearly every small-town retail
store additionally offers their products through
an online retail store. " James says many of these
gig workers may be freelancing or working a " side
hustle " in addition to a full-time job. " We also
have many customers outside of their day job
selling their handmade crafts through Etsy, and
individuals that buy and sell products through
eBay, " he adds. " Not to mention YouTube creators
and Uber drivers. "
Quick stat
27%
of working-age
people in the U.S.
do independent
work
Source: McKinsey Global
Institute
Not all community banks are seeing a huge
spike in gig workers, but many are seeing at
least some change. Peter Nelson, president of
$290 million-asset Glenwood State Bank of Glenwood,
Minn., says that over the past few years,
his community bank has been seeing more customers
doing contract work. " Being in a rural
area, many times this contract work allows people
to work from home, " Nelson says. " It still is
less than 5 percent of our applications. However,
it used to be close to zero. "
How to accommodate gig workers
One of the biggest challenges of banking a typical
gig worker is that there isn't any such thing. Some
of the customers that fit into this category are salaried
employees working a side hustle; some are
students or homemakers working a full-time or
nearly full-time schedule of independent work;
and others can be very profitable micro-businesses
boasting only one or two employees, with
independentbanker.org Q 23
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Independent Banker - February 2019

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