Gig economy and its impact on the financial services sector – Part II

Published on by Paramjit Ahluwalia

Continued from part l

The financial services sector has witnessed a technology revolution, with organizations investing in digitization and innovation, and increasing their focus on customers’ needs to provide personalized services. In their bid to keep pace with these trends, companies are changing the way they work. Businesses are increasingly looking to expand their teams by turning to external consulting talent to stay ahead of the competition.

Financial institutions are inclined to hire more gig workers, as it helps them scale their operations and gives them the flexibility to add staff with varied skill sets within the financial domain faster than making lateral hires from the market.

In the insurance sector, gig workers play an important role during times of higher insurance claims (such as severe storms and floods), giving companies the flexibility to use need-based hiring at different levels and pay scales.

The finance (including insurance) industry has the second-largest share of gig workers, as per BCG research on 11 global markets, with specialists in artificial intelligence and machine learning accounting for the largest chunk of gig workers.

The employer’s view of the gig economy: Opportunities and Challenges

We believe the gig economy offers a good opportunity for employers to connect with skilled professionals through easy-to-use platforms. This also helps employers reduce staff costs and hire staff faster, based on specific project requirements. While demand for gig workers is growing, this economy is also witnessing major challenges, as gig workers have no protection against unfair dismissal, no right to severance payments, and no provision to receive minimum wages, paid holidays, or sick leave.

Opportunities

• Provides employers the flexibility to onboard employees with niche skill sets without taking on the burden of permanent headcount costs

• Enables the use of on-demand operating models in the insurance and banking sectors for back-end operations, creating employment opportunities for freelancers

• Allows start-ups to hire freelance workers to quickly scale their businesses

• Allows businesses to have diverse talent pools with the flexibility to manage dynamic business volumes

• Reduces costs, as freelance workers are usually not eligible for benefits, and hiring them does not entail incurring other costs, such as onboarding costs

• Helps employers significantly cut real estate and infrastructure costs

Challenges

• Flexibility offered by the gig economy, which could lead to gig workers taking on too much work, resulting in poor performance

• Stringent compliance and information security requirements of the financial sector, which restrict some firms from hiring temp workers

• Lack of training, skill development, and knowledge-sharing sessions

• Lack of guidance, restricting gig workers from making planned moves and enjoying stable careers, as opposed to traditional workers

• Lack of job security and healthcare and other employee benefits such as medical insurance

• Inability to use gig workers in projects where specific technological infrastructure or platforms are required

• Irregularity of income (dependent on project requirements); a change in requirements or schedules could also cause companies to switch workers

Dynamics of the gig economy

Source: Technology Vision for Insurance 2017, Accenture, 2017

Gig workers are best suited for an environment where task-based work is involved and less integration is required with the onshore team. On the other hand, for role-based work, an outsourcing model would be more suitable, with dedicated FTEs providing integrated services.

The gig economy is a win-win situation for both employers and employees. It has been gaining importance, supported by growth in digital freelance marketplaces, high-power mobile-based computing tools, and the complete autonomy it offers employees. We believe that if the financial services sector is to grow and sustain margins, it would need to leverage these channels.

To benefit from this trend, employers need to put in place formal compliance policies to establish the working rights of gig workers. The gig economy is likely to be further supported by the new EU law, which could be effective from April 2020 and primarily includes measures to protect workers by ensuring transparent and predictable working conditions (including free, mandatory training, and limits on working hours and the length of the probationary period).

Role / impact of a knowledge services partner

However, stringent compliance norms and information security requirements, and the lack of job security and other benefits are key threats for gig workers. Due to the inherent challenges associated with the gig economy, collaborating with a dedicated offshoring partner such as Acuity Knowledge Partners allows companies to enjoy the stability that comes with having a committed partner at all times, without worrying about the availability of a freelancer. Offshoring partners have also started building automation capabilities and developing technology platforms using AI and machine learning to keep up with the demands of the current technological environment.

Sources:

• Talent Management in Financial Services

• Fintech is changing financial services for gig economy workers

• The Financial Services Markets, 2019 Targeting Gig Economy Workers

• How the Gig Economy Can Drive the Next Wave of Fintech and Banking Innovation

• What Gig Economy Means for FinTech

• What the Gig Economy Means for the Emerging Fintech Industry

• The New Freelancers: Tapping Talent in the Gig Economy

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