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Freelance FinTech Chases The Sweet Spot Between Consumer And Business Banking

Freelance FinTech Chases The Sweet Spot Between Consumer And Business Banking

May 20, 2021 at 01:00PM
by PYMNTS

Gig workers. Contractors. Solopreneurs.

Whatever you (or regulators) call them, working for oneself can be both a rewarding and challenging professional experience.

The reputation of freelancing is one marked by financial struggles, working paycheck to paycheck or using side jobs to moonlight and earn a bit of extra cash. Today, however, the freelancing community has blossomed into an opportunity for stable income. In fact, according to Oona Rokyta, co-founder and CEO of FinTech Lance, freelancing became among the most stable of professional positions at the peak of the pandemic.

Yet as more professionals turn to solo work, their financial picture can become immensely muddled.

“Overwhelmingly, people are reliant on multiple sources of income, relying on [themselves] to monetize their skills, rather than being dependent on any one job,” Rokyta told PYMNTS in an interview.” As you start tracking multiple income streams and transitioning in and out of them more rapidly, it becomes a huge challenge for organizing your financial self.”

As individuals that sit somewhere along the spectrum between consumer and small business, freelancers need banking tools that can support their unique needs on both the personal and professional side of financial management, she explained.

Finding The Sweet Spot

With experience as a freelancer in the public relations arena herself, Rokyta said she became frustrated with the tools that were available to freelancers.

“Despite having an accountant and QuickBooks, I really couldn’t get ahead of my cash flow and organizing finances in a way that I thought I was really on top of it,” she recalled.

Freelancers are, in a sense, their own small businesses. Yet the very purpose of a career is to support goals in one’s personal life, whether it be saving for retirement, buying a new home or taking a vacation. As such, any financial services technology that targets the freelancing community must be able to play double-duty, addressing both needs.

At the same time, that single solution must draw a clear distinction between those two worlds.

“It’s critical for freelancers to separate out their business and personal finances, and account for everything appropriately,” said Rokyta, adding that mixing finances can have negative implications on tax calculations, personal savings and more.

Historically, freelancers have lacked access to tools that can automatically categorize business expenses and file taxes while also automatically depositing the appropriate income into a professional’s personal account, for example.

Lance aims to fill that gap, and investors have placed $2.8 million in seed funding to support that initiative. The company provides banking and account services from Blue Ridge Bank, while its debit card product is available from Visa.

Reshaping The Freelance Economy

Connecting freelancers to adequate banking and finance services and products will be critical in supporting the continued growth of the freelance economy, said Rokyta.

Already, it’s an ecosystem that can look far different than its reputation.

“The average income of a freelancer is actually middle-class America, about $60,000 a year,” she added.

These are not professionals waiting on payday to be able to pay their bills, so while delayed payments from clients and customers can be a challenge, the biggest cash-flow problem can be traced back to needing control over and consolidation of B2B payments, expenses and financial analytics.

The financial services space must take a more “proactive” approach to this customer segment, noted Rokyta, especially if it’s going to support the continued evolution of the market. Already, big changes are beginning to take shape. While traditionally, the freelance economy has been segmented into industry, moving forward, Rokyta predicted the space will be viewed in terms of income bracket.

At the low end — those earning less than $50,000 a year — freelances remain heavily reliant on platforms to source work and income. Higher-end freelancers like doctors and lawyers, meanwhile, are making “well into six figures” and thus need more sophisticated accounting, invoicing, payments and other systems, she said.

Lance is targeting the middle, those earning $50,000 to $125,000.

“That’s where people are really confused,” noted Rokyta. “They’re making money, they’re not living paycheck to paycheck, but they don’t know how to organize their finances.”

By striking the right balance between streamlining and consolidating finance, payments and banking, while still maintaining that clear distinction between personal and professional finance, FinTech will have the opportunity to help these solopreneurs embrace the lucrative opportunities in freelancing — rather than stand in the way.