Fintech can deliver answers for gig workers on the brink

Digital platforms such as e-hailing and delivery services have in recent years made it possible for workers around the world to participate in the gig economy, providing a degree of formality and stability to their work. But Covid-19 has highlighted the fragile nature of work for people in the gig economy: with few benefits and protections, these people are hit hard by the crisis.

In a recent survey of 600 SA gig workers conducted as part of a year-long research project entitled “The Digital Hustle: Gig Worker Financial Lives Under Pressure”, our research team found that three-quarters of respondents experienced a decrease in income from March. More startling, 80% of gig workers now earn less than R4,000 a month, compared with 16% before lockdown.

Some gig workers are affected more than others. Ehailing drivers were twice as likely as delivery workers to report a decline in quality of life, with 83% suffering a large decrease in income. Coping strategies among SA gig workers vary. Some have a financial cushion, but a majority live on the edge.

If they lose their main source of income, 58% of respondents cannot cover household expenses for a month without borrowing. Most made sacrifices to cope with the pandemic and accompanying economic dislocation: more than half reduced household expenses, almost half borrowed money, and almost three out of four relied on savings.

In the next six months, nearly all respondents plan to restart or continue the work they were doing before the lockdown. However, the majority are concerned about the ability to earn an income, find work and cover day-today work expenses.

For 80% of them, the health risk associated with returning to work is not a top concern. What they need is an income to take care of themselves and their families.

The study was the first step in helping fintech entrepreneurs connect with the people most in need of financial services and better understand their needs. As thousands of SA gig workers struggle to earn a living, there’s a growing debate about how fintech companies can build lasting solutions for this vulnerable population.

Now we need to find ways to plan beyond the pandemic and create a better safety net for gig workers, including benefits and health care.

Imagine a post-Covid world where a street vendor can easily transition to a new job in food delivery, with oneclick financing for a motorbike and ready access to customers through a delivery service app. They don’t have to worry about their ability to work tomorrow because they have a small line of credit to fill up the bike with fuel in the morning, with the loan deducted from their earnings at the end of the day.

They don’t worry about their family going hungry if they get sick or injured because they contribute a portion of their daily earnings to an insurance plan. And they are planning for the future, with opt-in contributions from their earnings set aside each workday to go towards rent, children’s school fees and a rainy-day fund.

This is a world where finance is intuitive and integrated into everyday lives, embedded in earnings, spending, goals and life decisions. The convergence of finance with everyday life is particularly notable in the gig economy, where a historically underserved informal sector is connected to digital finance.

Especially in emerging markets such as SA, e-hailing, delivery and home services platforms brought informal workers into the mainstream economy, improved their earning opportunities and connected them to digital financial products such as payments and credit. Despite these benefits, gig workers just don’t earn enough and remain financially vulnerable. As the Covid pandemic has shown, gig workers cannot build a financial cushion and are vulnerable to sudden and drastic economic shocks.

But we also see glimmers of opportunity as we hear from workers about their financial lives, challenges and aspirations. In the face of hardship, the gig worker population is adapting and growing. Many are finding new ways to earn an income.

The Covid crisis could also have the effect of opening the gig economy to more women, potentially increasing their resilience and income. Among informal female workers who were not part of the digital gig economy before the lockdown, more of those seeking additional work are moving into app-based delivery.

Costa is managing partner at global venture capital firm Flourish Ventures, that has investments in African startups including Apollo Agriculture, Fair Money, FSI, Flutterwave, Lendable, Lidya, Paga, Pula, Seedspace and Zoona.

GIG WORKERS CANNOT BUILD A FINANCIAL CUSHION AND ARE VULNERABLE TO SUDDEN, DRASTIC ECONOMIC SHOCKS