The Path to Profitability for Marketplace Owners
Discover how a single implementation of an embedded finance approach can significantly impact the operational, strategic, and commercial aspects of your platform, resulting in increased profitability.
The gig economy, which gained popularity during the 2008-09 financial crisis when many people were forced to rely on task-based jobs, has grown dramatically over the years and continues to grow by the day. Over the next year, the number of global gig workers is expected to increase by more than 30 million. In fact, according to a report by Orbis Research that was released in 2021, the global market for freelance platforms is predicted to expand at a compound annual growth rate (CAGR) of 15.3% between 2021 and 2026. More employees are beginning to recognize the advantages and flexibility of contracting and independent work.
Let's look at some interesting statistics specifically from the United Kingdom. From 2016 to 2021, the following sectors experienced rapid growth in England and Wales: Delivery driving (up 350%), household services (up 166%), errand running (up 200%), and remote digital online tasks (up 100%). It’s certainly fair to say that many sectors in the gig economy have seen fantastic growth, however, there seems to be a storm brewing.
We are currently surrounded by the foreboding clouds of inflation and the approaching recession. What does the future hold for the gig economy, and how are you, as a marketplace leader, preparing?
Inflation has recently provided a new incentive for freelancers to join the gig economy. As the cost of rent and food rises, gig work can supplement primary jobs that don't pay enough to live on or are otherwise unsatisfactory.
According to MBO Partners, 63% of gig workers say that having a flexible schedule is more important to them than a higher salary. Picking up shifts allows a freelancer to work when and how much they want, which is sometimes necessary to balance life commitments such as school or child care. This is something that traditional permanent employment does not provide.
The distinction between gig work and formal employment is becoming increasingly hazy. Staffing firms have historically supplied temporary workers for businesses, such as warehousing and manufacturing, where they had to show up at a given hour on certain days until the business no longer required the extra labor. Some agencies now provide one-time, no-commitment shifts in workplaces that previously did not use temporary staff, such as restaurants, hotels, and retailers.
How Can You Attract More Freelancers to Your Marketplace?
As previously discussed, gig workers prefer on-demand work due to its flexibility and autonomy. The significance of having flexibility in how you get paid is something we haven't yet talked about.
According to Branch x Marqeta 2022 Gig Payments Report, almost 70% of gig workers prefer to get paid on the same day they work; 39% prefer to get paid right away after each job, and 29% prefer to get paid at the end of each day.
Getting paid matters, and getting paid on time, reliably, and consistently can mean the difference between having money set aside for larger purchases like a first home or training programs versus having to pay for day-to-day expenses. If you don't pay your freelancers promptly, the relationship may end and they may start finding work on other platforms.
Can your marketplace pay freelancers instantly and still be profitable? Do you have a solution that complies with the payment regulations that apply to marketplaces?
Improving your supply-side payment terms can help you attract more freelancers and improve your service.
One of the UK's leading on-demand grocery delivery companies implemented UNIPaaS' embedded payment platform to address legacy issues with traditional payment providers, improve customer experience, and operational efficiencies, while also providing a frictionless fully compliant payment solution. This laid the groundwork for the company's ability to scale without increasing headcount.
Due to lockdowns and stay-at-home advisories, the rapid growth of online grocery delivery platforms peaked during the pandemic. These platforms became venture capital firms' darlings, with investments reaching $18.5 billion in 2021. Following Covid, the market trend shifted, and the rapid grocery delivery market experienced a downward turn, requiring platforms to improve their operational efficiency and achieve positive unit economics.
On its way to profitability, the on-demand grocery delivery company has chosen to engage its payment operation, overcoming barriers such as manual intervention and reducing the use of multiple payment systems.
Here’s what the on-demand grocery delivery company achieved as a result of its collaboration with UNIPaaS:
- Three payment platforms were combined to form an automated single end-to-end flow.
- Thousands of suppliers have been onboarded in days thanks to an automated KYC and KYB check process.
- Marketplace is now end-to-end compliant.
- The payout time for drivers was reduced from 2-3 days to 10 minutes.
- Outbound payments to customer service are now more visible via the UNIPaaS portal.
- Cards Processing fees were cut by more than 30%.
- Refunds are processed immediately.
Furthermore, drivers benefited from a quick and easy onboarding process, instant payment, and overall cash flow improvement, reflecting the on-demand grocery delivery company's approach to treating drivers as business partners.
Marketplaces are benefiting from real-time payments in addition to the recruitment bonus because the granular data produced by these systems gives them a much better understanding of their payments. With significant potential gains in business liquidity and cashflow forecasting, they can then engage in more proactive and effective management. Businesses will find it much simpler to manage payments to independent contractors who bill by the hour, for instance, by implementing same-day payrolls.