The nature and relationship of workers with their employers is constantly evolving. While clear trends, such as gig work and the digitization of the workplace, have emerged in recent decades, the COVID-19 pandemic expedited the broader impact and implications of these changes. At Accion Venture Lab, we believe that there will be a need for product and delivery-related innovations to meet the financial needs of workers operating in this new paradigm. There are five key themes that we anticipate will influence the future of work and the opportunities for fintechs to deliver financial services to a large and growing underserved market:

Work from anywhere enables sole proprietors, freelancers, and global recruitment

The COVID-19 pandemic forced organizations to embrace remote work. Since most organizations were unprepared for this change, they had to invest in technology that enabled remote interactions and collaborations between geographically dispersed teams. Employees found they could work from smaller cities with a low cost of living and a pace of life of their choosing. This shift has led to the emergence of freelancers and sole proprietors who value flexible and part-time work engagements. We believe this trend is here to stay and will lead to an increasing percentage of the workforce that lacks the security of full-time employment and is more vulnerable to the ups and downs of economic cycles. In addition, the traditional ecosystem of financial services players will face challenges in understanding the irregular cashflows of these professionals and will need to innovate to create credit, savings, and insurance products for them.

We believe that sole proprietors and freelancers need business digitization tools to create contracts, provide cost estimates and invoices, and manage their projects effectively. The data emerging from the usage of these tools can be used to effectively deliver working capital products such as invoice financing. In addition, we see the potential for savings and insurance products that can leverage technology to provide tailored solutions to address the needs of this customer segment, such as the absence of retirement benefits through employers or lack of ability to invest regularly due to irregular and unpredictable cash flows. Health insurance products such as family floater plans may help replicate the benefit and price advantage of employer-provided group insurance products.

In addition to enabling freelancers, remote work has propelled global recruitment platforms to scale as companies hire internationally. Recruitment platforms can become vehicles to deliver easier and faster cross-border remittances and customized insurance products. As more people move to foreign countries for work opportunities, there will be a growing need for financial services for the growing migrant population with limited credit history in their new country.

Rise in contract and gig staffing

A recent study by BCG estimated that digital platforms now employ over 200M gig workers globally, and this trend is only increasing. While some workers choose gig work because it offers significant flexibility, for many others, it is the only option as the nature of work changes, and they struggle with variability and timeliness of payments, precarious job contracts, and lack of career growth.

While gig work is not a new phenomenon, the digitization of gig work is new and has resulted in the formalization of these cash flows and brought more recognition to those operating in this economy. Fintechs are developing innovative underwriting models based on the digital trails generated by these platforms. As governments invest in and develop Digital Public Goods, it should become easier to track gig workers across multiple platforms and provide them with formal recognition of their skills and employment history to tailor specific financial products.

AI and automation will change the nature of work

We are already starting to experience AI-led automation, increasing the productivity of jobs focused on mechanical and repeatable tasks. While this may eliminate several existing job roles, we also see an increase in demand for new kinds of skills and jobs. As a result, the next-generation workforce will need to upskill, improve their capabilities, and move up to higher-skill-based job roles to keep up.

Thus, there is a rapid increase in corporate-led upskilling programs as well as employee-driven, self-optimized upskilling programs and boot camps. Founders at the intersection of edtech and fintech provide tailored solutions with measurable earning outcomes and flexible payment models. For example, Henry, one of our portfolio companies operating in Latin America, runs tech boot camps. Low-income students can enroll via an income share agreement that allows them to pay back from future earnings after the program.

Rapid increase in representation of women in the workforce

The remote work trend has created a flexible work culture across many corporates. For many women with the primary responsibilities of childcare or who cannot travel long distances due to safety concerns, work-from-home policies have allowed them to participate in the workforce. Prolonged periods of remote working facilities for parents on paternity leave provide a smoother path for women to return to the workforce. In a recent example, India’s policy think tank, Niti Ayog, recommended that mandatory maternity leave in India be extended from six months to nine months.

We believe this trend will help increase the proportion of women in the workforce. Thus, we are excited about companies identifying and serving the unique needs of financial products for this customer segment. We believe that products such as savings and investments have long been built as a one-size-fits-all proposition, and we see a need to identify the need to use a gender lens in designing and distributing these products as more women enter the workforce. Examples of companies tackling this problem statement include Lxme and Leap.Club, which are building investments and savings platforms for women customers.

Expanded employer role in employee well-being

While multi-national corporations continue to take the lead in providing services and facilities that enhance employee well-being, we have witnessed a similar trend emerge for micro, small, and medium-sized enterprises (MSMEs), especially ones that employ an informal workforce. The impact of the COVID-19 pandemic was particularly harsh on the informal workers who lacked access to health insurance or savings to rely on when their regular income was disrupted. We’re seeing early-stage founders respond to this increased awareness amongst MSME employers to provide health insurance and enable savings and credit solutions to their employees.  We have seen a similar trend with last-mile delivery platforms that employ a large number of informal workers. What was largely seen as a do-good initiative of enabling credit or insurance to the gig workers on their platform in the past has now become a competitive moat by improving employee retention and enhancing productivity.

As a result, an increasing number of startups will race to build distribution and product customization platforms catering to the employees of MSMEs operating in tier two and tier three regions in developing markets. Startups, such as our portfolio company Advance operating in the Philippines, launched neo-banking products leveraging employment data to provide early wage access while also providing group health insurance delivered to the employees through their MSME employers. The enhanced employer role offers an effective means to provide financial products that help informal workers become more resilient. However, these fintechs need to solve for the price sensitivity of these employers and the challenging unit economics of high distribution costs in Tier 2 and 3 cities along with the lower number of employees/MSMEs on their platform.  

At Accion Venture Lab, we’re continuing to watch these trends and look for opportunities to address the evolving financial needs of the working population of the future. We believe these changes offer unique challenges and will require innovation and the use of technology to address these challenges. Listen to the most recent season of our Fintech for the People podcast to hear more about the role of fintech in the future of work.

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