Gig-Economy keeps thriving with smart cross-border payments

Soma Tah

Cross-border payment platforms play a crucial role in enabling this freelancing ecosystem, helping businesses and independent professionals to pay and get paid globally, as easily as they do locally

The future of work has been changing rapidly with the entrance of millennials and Gen Z into the workforce and manifesting in their increasing tendency to treat jobs more like gigs and not some career destinations. Various study reports suggest that a growing majority (as many as 64 percent) of millennial full-time workers do side hustles. Gen Xers and Baby Boomers are also catching up fast with this trend. Working as independent professionals or freelancing has become an increasingly popular career choice for many of them as they can work on their own terms. 

Digital technologies have made Remote Work accessible and accepted by an increasing number of organizations who have started embracing the growing reality of generational shift into the modern workforce. Thanks to the proliferation of freelancing marketplaces such as Upwork, Toptal, Fiverr, etc. and the availability of efficient collaboration tools, and hassle-free payment solutions companies can find remote workers and skilled talents worldwide and connect with them.  

The ongoing pandemic crisis has also changed the future of work forever by making remote and on-demand workforce the new norm, and opened new doors for many skilled workers. While many found their world upended with mass layoffs, furloughs, and pay cuts some of them just took a lap of faith and started as independent professionals or freelancers. 

The Gig is up despite pandemic  

“Although people had to reset, they found businesses who wanted to outsource to the freelancers in India. Cost arbitrage plays a crucial role here. If you hire a freelancer in the US, you have to pay almost $40-45 an hour, or sometimes even upwards of $50 an hour. In India it is mostly at $15-30 an hour depending on what kind of work you're getting done for cost arbitrage,” said Rohit Kulkarni, Vice President & Regional Manager– South Asia & MENA Region at the cross-border payment platform, Payoneer.  

Payoneer’s data in The State of Freelancing during COVID-19 report indicate that the pandemic could not dampen the thriving freelance economy. In most markets, the freelance economy is still going strong and continues to show strong signs for even stronger growth. India saw a massive 46 percent increase in new freelancers from Q1 to Q2 2020 to emerge as the second fastest growing freelance market in the world. India's freelance economy currently consists of an estimated 15 million freelancers. After comparing 2020’s winter holiday season to 2019’s, Payoneer data reveals that global freelancers actually enjoyed a 54 percent year-over-year increase in revenue.   

Data & Image Source: Payoneer 

Simplifying the global freelancer payments is a must

Although many freelancers work for clients based all over the world in this increasingly borderless world, making payments to international freelancers can be a costly and cumbersome process. The space is often fraught with challenges such as high markups on currency exchange, lack of transparency on fee structure, and complex documentation processes, etc. 

Getting payment from clients in USD, GBP, or EUR can be an extremely cumbersome process to manage, confirmed Swati Agarwal, an independent professional who is running her own company now. She started her career as a computer engineer in Tata Consultancy Service, but chose to move to her hometown, Siliguri- a small town in West Bengal to start as an independent professional.  After getting good response from the clients abroad, she founded a company called Appycodes and is managing a team of 18-20 people now.

Recounting some of the hassles related to cross-border payments she faced during the process, she said, “We faced a lot of issues after the introduction of GST in India as services exporters are required to furnish a Foreign Inward Remittance Certificate (FIRC) to get GST benefits. But obtaining FIRC used to be a very tiring and costly process, as we needed to provide paper applications to banks for every transaction, while banks used to charge significant document fees to process FIRC requests.”  

However, things are not the same anymore, thanks to the continuous innovations taking place in the Payment Service Providers (PSP) space. Pymnts in one of its ‘Gig Economy Tracker’ in 2020 observed that gig workers/freelancers, especially those who are on the younger side are not ready to accept traditional excuses like international payments take more time or that currency conversions are costly and difficult.   

Choosing the right cross-border payment solution 

It is very important to choose the right PSP who not only helps the users to do cross-border transactions as quickly and cost-efficiently as possible, but also does it in a seamless manner.  

Partnering with third-party providers equipped to handle cross-border payments such as PayPal, TransferWise, Payoneer, etc. can iron out a lot of freelancing payment issues. “Third parties can mitigate potential payment process hiccups, including foreign exchange concerns and payment speeds. They are also better able to educate businesses and gig workers about the costs involved in sending payments via wire transfers, physical checks or other methods because many utilize automated software that tracks shifting foreign exchange rates and other facets that impact currency exchanges,” suggested the Pymnts report on Gig Economy.   

There are PSP platforms which allow freelancers to get paid from freelancing marketplaces and private clients directly to one single account. These platforms also make the transaction experience seamless for the users on the platform by allowing users to send invoices, generate payment requests, track them, send reminders, etc.  

Reaching new markets also becomes easier if the platform facilitates a wide range of payment and settlement currencies. As setting up multiple bank accounts in the countries that they are looking to accept payments in can be costly, selecting PSPs who allow use of local currencies for transactions is a good option. This can help keep the pricing transparent. Checking the transaction costs and the forex rates they offer is also important. Low forex rates raise the costs of currency conversion, for example, if you convert USD to INR, the deductions will be pretty high. 

It is wise to select a PSP that offers a secure, global payment gateway enabling funds to be securely transferred between the professionals, businesses, and the issuing and acquiring banks. It validates the payment and encrypts the sensitive financial data that is being transferred between the relevant parties.  

The key lies in localization and co-creation 

Unfortunately, no company has been able to crack cross-border payments issues fully yet. But keeping the compelling prospects of cross-border payments in the gig and freelancing economy in mind, it has become extremely crucial for the PSPs to listen to these users carefully, understand their challenges to innovate further.  

Some of the features and services that Payoneer provides today on its platform are the result of active listening, said Kulkarni. Payoneer, for example, supports third-party API integration with useful tools such as Envoice, TopTracker, Time Doctor and other business platforms- which makes it easier for freelancers to transact on its platform. Platforms like PayPal and Payoneer also offer automated digital FIRC to ease the GST-related woes of the freelancers.  

“We are using our expertise to do many such localizations and create a conducive environment for the independent professionals/freelancers to grow globally. Helping users like Swati to get paid in a seamless manner, faster and at a low cost is going to help us transform some of these individuals/ freelancers to grow into small and medium businesses and hopefully to become much larger organizations at some point of time, driving a lot of transformation for India globally,” added Kulkarni.