The gig economy is growing. Gig workers - either as a primary way of working or as a side hustle - contribute £20 billion to the UK economy every year and the number of regular gig workers in the UK is estimated at 7.25 million. This equates to over 20% of the total UK workforce (based on end of 2022 figures), an increase compared to 14.7% of the total workforce employed in the gig economy in 2021.  

However, this increasing sector of the workforce remains underserved when it comes to financial products and services - loans, mortgages, and credit cards for example - that recognise their working patterns and multiple sources of income. As a result, millions of workers in the UK are struggling to attain these services due to a data disconnect – this is linked to banks’ decreased rate of innovation and inability to integrate data efficiently, despite presenting potential growth and revenue generation opportunities for banks. 

So how can banks readdress this challenge and what lessons can they learn from fintechs to accelerate progress? 

Banks missed opportunity 

Rollee’s Gig Economy Equality Gap report found that an overwhelming majority (70%) of gig workers struggle to access basic financial products like loans, mortgages or credit cards. In addition, two thirds of those surveyed have been denied a loan since becoming a gig worker, and consequentially one third are unable to purchase a home, despite financial eligibility from a good credit score. Gig workers are also typically having to work harder to get approval - having to apply through three different providers on average before receiving approval. Rollee’s report revealed that 39% of gig workers have considered giving up freelance work for traditional employment to more easily gain approval for financial services. 

Filling in the blanks 

So why are banks and other financial institutions underserving gig workers? It appears that banks are not currently set up to account for freelance employment patterns and multi-source incomes. Rollee’s research revealed that 73% of financial institutions surveyed admitted that their risk assessments do not enable them to provide a complete picture of gig workers’ income, payments and employment. Because of this lack of transparency, over a third (34%) of financial institutions are more likely to approve a PAYE application than one from a ‘non-traditional’ worker.  

It's clear that the primary challenge hindering banks from effectively catering to this expanding customer group is the accessibility of dependable data.  

Financial institutions often face obstacles in integrating data when they seek to utilise alternative income and employment data. Bringing together data from freelance platforms and HR software internally via public APIs can be problematic. Accessing private APIs involves negotiating with platforms, which may lead to refusals, and integrating numerous platforms presents scalability issues. This method also demands significant investment from backend, data, and DevOps teams, hindering data-driven decision-making and growth. 

However, banks and financial services must understand that adapting to serve this growing customer segment presents an opportunity, not just a technical hurdle. Having access to more comprehensive data about customers can greatly enhance the end-user experience. Likewise, it will offer a complete view of the customer and address gaps in outdated infrastructure with alternative income and employment data. Consequently, more customers will become eligible for a wider array of products, leading to better decision-making throughout the entire customer journey with the bank. 

Fairer finance needs fintech  

Banks will benefit from looking to the fintech ecosystem to drive the implementation of open finance. As with many technological shifts, fintechs are in a more agile position from which to adapt and innovate rather than the established players. By collaborating with the fintech ecosystem banks will be able to integrate the appropriate income and employment data so that they can take up the opportunity to service gig economy workers and deliver fairer finance for all.