Digital technology is providing more options for today’s workforce. And workers are using these options for greater autonomy and independence. But this independence brings with it challenges when it comes to finances and reliable income.
In order to address the financial challenges, a new partnership between Mastercard and Evolve Bank & Trust (“Evolve”) is going to provide early wage access to employees. Using the Mastercard Send platform, an employer can send funds in real time to any debit card.
This is especially beneficial for freelance/gig workers to manage any lag between when bills are due and when they get a paycheck.
Mastercard Send and Gig Workers
In an exclusive interview with Small Business Trends, Jess Turner, executive vice president, Product and Innovation, North America, Mastercard, explained the issue of having a reliable income.
Small Business Trends: What challenges do freelancers/gig economy workers face when it comes to ensuring a reliable income?
Jess Turner: Oftentimes, gig workers and freelancers work multiple, on-demand jobs. While these jobs offer flexibility and independence, sometimes, the current economic infrastructure isn’t designed to support these workers.
Traditional views of benefits, services and credit underwriting haven’t evolved to fit the needs of a gig-economy. The volatile nature of on-demand jobs can impact one’s financial security long-term since. It Is more difficult to plan ahead and stabilize finances when you are living paycheck to paycheck.
As this type of work expands into every corner of the economy, governments and public and private organizations will have to relook at how traditional pay schedules are designed. And they will have to provide more meaningful benefits to attract and retain talent.
With this partnership, employers can use the payment infrastructure of Mastercard Send so their employees can manage any income volatility.
According to Mastercard, the goal is to alleviate the stress of living from paycheck to paycheck and using pay advance loans.
In 2018 U.S. gig workers received close to $236 billion through pay advances. These advances have unclear terms and shady fees which further exacerbate the financial difficulty workers face.
In the press release, Turner says, “With Mastercard Send, we want to provide a new wage system – one that is in tune with the workforce of today.”
Small Business Trends: Is the partnership available to a global audience? If it is not available globally, will it be?
Jess Turner: This specific partnership is only available in the U.S. However, Mastercard partners with other organizations globally to bring the same ease and secure payment model to gig workers outside of the U.S.
The Impact of Freelancers
Small Business Trends: What is the impact of freelancers in the workforce? Why are they an essential part of the workforce moving forward? How can businesses, especially small businesses, can capitalize on them?
Jess Turner: The Federal Reserve’s May 2018 report on the economic well-being of U.S. households, found that 31 percent of adults are engaged in gig work—up 3 percentage points from the 2016 report.
What this indicates is that we can expect to see a continued rise in gig and independent workers over the next several years. Overall, this shift toward gig work can lead to greater workforce participation and can deliver broad benefits to small businesses.
Take a look at the infographic about pay advance and the gig economy from Mastercard.
Turner goes on to say small businesses will have to disrupt traditional wage and benefit systems. This includes thinking differently when it comes to hiring gig and hourly workers.
With tools like Mastercard Send a small business can remove the burden of pay advance fees. This is a considerable drain for people living paycheck to paycheck.
For small businesses, it means not having to write checks and improve the payroll process with greater accountability and automation.
I guess it helps because it means that payments can be easily sent and transferred.
So is Mastercard charging a fee for this? If so, how high is it?
I agree with the assessment that short-term loans can be expensive and should be avoided, but hopefully Mastercard is making it low-cost or free.