Payments in the age of the gig economy

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The phrase ‘gig economy’ is becoming an increasingly familiar one; enough so to feature in the presidential contest in the US, where one study predicts that 40% of workers will be independent contracts by the end of the decade. The gig economy, also known as the on-demand economy, is where jobs for life and salaried employees are a thing of the past and workers regularly take on freelance assignments and short-term projects. This rapid growth in small-scale entrepreneurship is variously regarded as a highly positive development and one that can be exploited by corporates exploiting weak employment laws to their advantage.

One of the biggest challenges many corporates face in the “gig” economy, where they’re hiring freelancers or contractors around the world to support their activities, is how to pay them cost-effectively. Traditional wire transfers are expensive, especially for smaller payments, and even wire transfers may not reach outsourced workers in emerging markets. GTNews recently spoke with Eric Barbier, chief executive officer (CEO) of Singapore-based business-to-business (B2B) mobile payments network TransferTo, about new solutions to address these challenges.

Enabling small corporate payments

When TransferTo started up 10 years ago, Barbier says, the focus was on enabling people to send small amounts – typically less than US$20 – cross-border using mobile airtime. Most transfers were sent across immigration corridors, such as US-Mexico or Singapore-Philippines, in the form of prepaid mobile airtime.

The company has developed relationships with more than 400 telecoms companies (telcos) and hundreds of corporates around the world over the past decade, particularly in emerging markets, and it has also become a UK-regulated authorised payments company. The advantage now for telcos, Barbier said, is that they can use his firm’s application programming interface (API) network rather than having to connect directly to telcos in dozens of other countries.

Over the past few years, says Barbier, TransferTo has added the capability to connect to mobile wallets, such as Kenya and Tanzania service M-Pesa. It now links more than 400m mobile money accounts; primarily in Asia and Africa as well as in Latin America. It offers a white-label B2B service to telcos or other firms with remittance licenses, which in turn offer person-to-person (P2P) payments in amounts usually ranging from US$50-US$500.

More recently, the firm has been receiving a growing number of requests from businesses that need to make small cross-border payments to individuals in emerging markets, many of whom are unbanked. One company wanted to pay about US$200 to a freelance web designer in the Bangladesh, for example, but found the cost prohibitive. Another, a fast-moving consumer goods (FMCG) company, needed to pay drivers who are distributing its products. Non-profits that have been giving cash to beneficiaries also wanted to replace the cash with payments to mobile phones, especially for amounts as low as US$5-US$10 per month.

Along with these payments to individuals, corporates were seeking to make smaller B2B payments. One digital service company wanted to receive cross-border payments before it shipped digital goods that its customers needed immediately and found that using SWIFT’s financial messaging service was too slow. Small hotels in emerging markets that needed to pay online booking platforms minor amounts for commissions and smaller corporates that needed to pay for advertising on social media such as Google or Facebook found the cost of transfers daunting.

TransferTo has responded by developing services for corporates to make payments to other companies or to individuals, directly to mobile phones. Along with working through its telco partners, it is linking up with some large corporates and outsourced payroll service providers.

In its work with corporates, Barbier said, the company “tends to work with larger companies’ corporate processes. We work with payroll companies, banks, non-governmental organisations [NGOs]. Regional banks, especially, want to be able to offer a complete solution.”

The advantage of this model lies in its simplicity. Vendors can send an invoice advising small merchants that payment can be made on a mobile wallet through a local telco, for instance, and the merchant can easily make the payment using their mobile phone.

As the gig and shared economy grows rapidly, more firms are looking for easier and cheaper ways to make payments. Fintechs such as TransferTo are providing an alternative, and are starting to give traditional payment providers a run for their money. The company has just announced a partnership with global payments network Eurogiro, under which Eurogiro members will be able to transfer funds to mobile money and banks accounts via TransferTo’s payments network.

As Eurogiro members reach more than 500,000 branches and four billion people in more than 50 countries, the deal represents a major step forward for TransferTo. “Post offices and banks globally are a major channel for money transfer,” says Barbier. “Eurogiro’s wide distribution of urban and rural member branches will provide flexibility to consumers to use physical outlets, cash and mobile money in the manner that they are most comfortable with.”


This article was first published on GT News.

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