Key points:
In 2017, there were 12.7 million Americans classified as occasional independent workers. Just 4 years later, that number has nearly doubled to 23.7 million, representing almost 15 percent of the total American labor force. It’s estimated that by 2025, the independent workforce will include over half of all U.S workers.
The larger this customer population grows, the more interest it receives from financial institutions (FIs) as they begin to realize that independent workers with their built-in flexibility and unique needs may be tastemakers for the future of financial services. As a result, FIs are finding it increasingly competitive to attract independent workers and turn them into customers.
Fueled by current trends in technology, the growing acceptance of remote opportunities and the emergence of new online marketplaces are pushing many Americans to actively explore independent work. Increasingly aware of this, banks and credit unions are courting these independent workers as a way to drive growth, raise deposits, and diversify their customer base.
If community banks don’t cater to this population, neobank or fintech options—like Chime and Varo—that serve niche banking populations are primed to step in. Think of the amount of times you’ve seen the phrase: “The bank for ___,” in the past 18 months alone. Customization and personalization are in high demand, and fintech options provide a different experience for customers who want custom banking exactly tailored to their needs.
Some of these fintech options are the real deal, but most of these providers don’t have the banking experience to give independent workers everything they need to succeed—often failing to support growing businesses as they increase in complexity.
Community institutions, on the other hand, are poised to lead from the front, leveraging their personal touch to build relationships with businesses that range from sole proprietors to large-scale organizations, while also sourcing creative solutions for their needs from decades of banking experience.
Let’s take a look at who independent workers really are, how they experience banking today, and some best practices for your institution to meet them where they are, no matter what.
The phrase “independent worker” is an umbrella term used to refer to independent contractors, freelancers, W-2 contract employees, temporary workers, consultants, gig workers, and more.
This wide-ranging category of independent work also includes many jobs that have only gained traction in recent years—digital content creators, rideshare drivers, and on-demand childcare and petcare providers, for example.
Additionally, the experiences of independent workers vary considerably based on whether or not this work represents their primary source of income. Independent work allows your customers the flexibility to work as much or as little as they need. 57 percent of American contractors work more than 40 hours per week—the equivalent to a nine-to-five job. Some level of reliance on independent work is also widespread; 44 million workers (28.2 percent of the American labor force) were self-employed at some point during a given week in 2019.
While some of your customers will be paying their bills with independent work, others are making supplementary income, and others still are engaging with independent work sporadically. The challenge for financial institutions in the next several years will be one of balance: how can you provide premier experiences to a small business with 100 employees as well as a TikTok millionaire who works for themself?
Community banks and credit unions—already working hard to close a digital banking gap—will be forced to balance these wide-ranging needs with smaller marketing budgets and less digital infrastructure when compared to larger banks. While this may appear to be a challenge, it’s important to note that much of the independent worker population relies largely on referral business and thrives on personal relationships and community. When it comes to this local relationship-building, community institutions have a built-in advantage when compared to money-center banks.
Most Americans in the labor force will either act as independent workers or work with independent workers at some point in their lifetime. In a Fortunly survey, more than 90 percent of American workers reported they would consider freelancing or independent contractor work. Independent workers are members of all age cohorts, come from all backgrounds, and operate businesses of all maturity levels and sizes. A few fast facts:
The pursuit of autonomy and security is common among most independent workers:
Independent work can open opportunities for those traditionally excluded by other types of work:
The demographic breakdown of independent workers is a sign of larger market trends:
Many believe that independent work is experiencing a meteoric rise as a result of Millennial and Gen Z workers maturing into decision makers within the labor force. While it’s true that Millennial and Gen Z behavioral patterns—increased desire for work-life flexibility and autonomy among them —are often used to explain the growth of independent work, they’re not the only ones driving the trend. A growing number of older Americans are using independent work to transition between full-time work and retirement, adopting positions like consultants within their subject matter expertise or branching out to new industries altogether.
Now that we’ve covered who they are and what drives them, let’s talk about how to turn independent workers into loyal customers.
Catering to the needs of the independent workforce means taking into consideration nearly $1.3 trillion of spending power (and counting)—an endeavor well worth the time of community banks and credit unions looking to grow deposits and compete for customers. As it stands today, members of the independent workforce are generally dissatisfied with their banking options:
This widespread dissatisfaction cuts two ways. On the one hand, community banks and credit unions can take advantage of the large number of customers who’ve been underserved by money-center banks with hands-on relationship banking. On the other hand, such widespread dissatisfaction undoubtedly points to the need to rebuild trust with independent workers who are skeptical of all banks, community FIs included.
Here’s what community banks and credit unions can do to make inroads and build trust with members of the independent workforce.
Independent workers need autonomy and flexibility. An omnichannel approach allows your bank or credit union’s customers to move freely between digital and in-branch channels during multiple banking actions, including the all-too-important moment of account opening. Here’s a scenario we’ve been using to illustrate how an omnichannel approach makes the difference:
Claire is a business owner who wants to open a business savings account for her new pottery shop and studio. After closing the shop one day, she travels to a nearby branch of her local community bank and begins opening a business account in person, only to find that she needs to upload documents that are back at her studio. The next day, Claire continues the application from the desktop computer in her shop, allowing her to watch over the studio while she does it. She gets sidetracked by customers and has to step away, before eventually finishing the application later that evening from her phone after arriving home.
Life happens, but thanks to her bank’s omnichannel capabilities, life didn’t get in the way of Claire’s ability to open an account for her business.
Almost one-fifth of independent workers cite bad customer service as the reason for their dissatisfaction with their current banking option. With an omnichannel approach, not only can you provide them with different types of customer service, but you can empower them to tailor that service to their own needs. The convenience of banking from home? Check. The ability for first-time business owners to walk into a physical branch and receive guidance? Check. Meet your most flexible customer segment with impressive flexibility of your own and they won’t forget it.
A large portion of careers that qualify as independent work are solely reliant on technology and digital access. Many contractors, freelancers, and small business owners leverage the internet to reach customers on the other side of the world, learn new skills quickly as they build their businesses, and lessen the time and effort to manufacture goods. They use platforms with slick interfaces that allow them to perform actions instantly and efficiently. If their banks don’t provide comparable digital experiences like what they’re used to, they simply won’t use the bank.
Community banks and credit unions can meet this demand by investing in well-designed experiences (helpful customer portals, simple sign-up flows, seamless online account opening) and adopting design thinking methodologies as they provide digital experiences and complementary in-branch ones. Here’s one of our favorite pieces about how banks can implement design thinking to satisfy their tech-savvy customers一offering insights about how to “architect digital financial products in 5 steps: Empathize, Define, Ideate, Prototype, Test.”
Lastly, 20 percent of independent workers want to change banks because their current option lacks features. Some FIs find it useful to survey their current customers about the features they’d like to see. These can include options like early paycheck access, intuitive p2p payments integration, and overdraft protection. After you build out the features and digital experiences your customers want, make sure to advertise them as much as possible.
The banks and credit unions attracting the largest numbers of independent workers are the ones constantly asking themselves how to go above and beyond to alleviate their customers’ pain points. Independent workers need more than just banking. They need insurance, they need document management, they need mechanisms to find clients and employees alike, and much more. Many are also embarking on this new career path for the first time.
Banks can win and retain these customers by becoming a resource hub. Collaborate with small business insurance providers and create referral systems for customers through affiliate marketing. Develop sets of financial best practices to share with independent workers based on your institution’s legacy knowledge. Advertise for local small businesses or independent workers in your branches. The opportunities are endless. The bottom line is that banks and credit unions win by providing the support that customers expect, as well as the support they didn’t know they needed.
Have questions about where MANTL fits into all of this? Reach out to our team to schedule a demo.
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