Post-Event Resources: Platform Work and Financial Inclusion: How Can the Development Community Extend Finance for Gig Workers?
On August 4, 2022, the USAID Private Sector Engagement (PSE) Hub held "Platform Work and Financial Inclusion: How Can the Development Community Extend Finance for Gig Workers?" a webinar in the Mobilizing Finance for Development (MF4D) series. Check out the event page to read the panelist biographies.
Key Event Highlights
- Platforms are a growing presence, and tend to draw in workers and sellers from the informal and semi-formal world.
- Trends in the platform ecosystem are more pronounced in South and Southeast Asia and Latin America, as well as - at a slower pace - parts of Sub-Saharan Africa.
- Platform workers describe their experiences on platforms as a mixed reality:
- On the positive side, platforms enhance their informal or semi-formal work, offer flexible hours, and are largely autonomous.
- On the negative side, there are risks such as the ever-changing income and rules that platforms may provide.
- Platforms are not a monolithic space; skill, gender, access to capital, and technical savviness are all determinants of what people experience.
Financial Opportunities for Gig Workers
- The platform market is attracting low-income people, and has two unique aspects on which to focus financial inclusion: 1) its digital rails reach workers directly; and 2) workers create unique data trails.
- The financial service market for gig workers is at a nascent stage and opportunities to situate financial inclusion into platforms will depend on:
- 1) transference of knowledge on workers’ financial needs to platforms;
- 2) data sharing between platforms and financial institutions;
- 3) policy and regulations around data sharing and financial services: and
- 4) trust in the platform ecosystem
Financial Equity and Approaches on Platforms
What does an equitable and fair approach on the part of a platform or its partner financial institution look like?
- Urvashi: We’re at an early stage, especially in the Indian context, in which platforms and financial service providers are still figuring out their best engagement model, what types of products gig workers need, and what the business model needs to be for financial service providers to offer those models.
- Urvashi: Income volatility and liquidity are two of the biggest financial needs for gig workers. We are yet to see models emerge between financial service providers and platforms that effectively address these.
What financial services appear to be of greatest value or need?
- Paula: For us, payment is the first stepping stone; it brings recurrency and frequency in the usage of our platform and initiates the transaction history of our users.
- Paula: After payment comes credit, which is one of the most demanded financial products in Latin America, followed by investment, debit cards, and insurance policies as users engage with their accounts.
To what degree are the financial services on Mercado Libre's platform also available to the people if they elsewhere for work?
- Paula: Mercado Libre's finance application is completely independent, so if the seller decides not to sell on our ecommerce platform, they can maintain their access to financial services.
- Paula: Recent waves of regulation have started brining in this concept of interoperability.
The Gig Worker Perspective
What evidence do we have on impact, and the effect of platforms on workers' livelihoods?
- Gayatri: There are a few variables, such as location and the nature of the work. Regardless, impact on well-being is a mixed reality that differs between emerging markets and developed markets.
- Gayatri: Platform work is here to stay. It brings its own opportunities and risks, but platforms are bigger than any single informal job, so they can exercise more power quickly of a large group of people.
What concerns are platform workers raising?
- Urvashi: We see concerns around declining wages, income volatility and liquidity, algorithmic management systems, and trust in the platforms to take care of workers’ concerns.
- Urvashi: Many financial products are helping workers who were already benefiting from the platform, but do not reach low performers that don’t have regular transaction history.
- Urvashi: If platforms are going to be an opportunity for financial inclusion, we have to create fair working conditions within platforms to leverage that opportunity.
Addressing Technology Infrastructure Challenges
How can platforms manage the security of online payment options, particularly in a market that lacks interoperability or seamless payment gateways?
Paula: This was one of the most difficult things to scale, but there’s been a lot of evolution in technology that allows us to provide secure payment processing. Fraud is always part of the equation, so you need to find an equilibrium.
Is the platform-based gig economy still viable in largely cash-based or limited infrastructure communities?
- Paula: In our case, we invested in creating those networks. We did not expect to have areas with cash in cash out solutions, but to go there and build marketplace and distribution networks.
The Role of Development Practitioners
Should donors approach the financial needs or opportunities in the digital-enabled gig economy differently than interventions that they have long supported for livelihoods programs?
- Gayatri: This socioeconomic group is largely the same as who we have been trying to impact for decades, with the exception that digital savvy is somewhat of a prerequisite.
- Gayatri: I would like to see development practitioners focus on the ecosystem, which is unique because of the data platforms generate, and the digital rails mean platforms reach users directly. Our question is: can this uniqueness translate into impact and opportunity for this group of people while avoiding the risks?
Are there other business models, such as cooperatives, that may also be viable for people acting in the gig economy?
- Urvashi: This is an area we need to look into more. Development practitioners should start by looking at workers’ data rights and data portability. And then, how do we tie those back together to enhance workers’ data rights so it's not just about their livelihoods, but also their access to credit.
- Urvashi: One of the dangers we see with platforms is the network effect that creates monopolies. Additionally, the platform-based model supports a select few workers. The way that competition works in the platform economy is not necessarily conducive to worker rights. Platform cooperative models are an interesting approach, but we haven’t seen much research yet and need to study.
What are the main development issues or interventions that we need to focus on to promote financial well-being for gig workers?
- Paula: Financial education is just as necessary as the tools we provide to improve our chances for success.
- Urvashi: One, gig workers are not a monolithic group. and we need to understand different types of gig workers so we can tailor the products we develop. Two, we need to ensure that work on platforms is pair, equitable, and that workers have agency and trust.
- Gayatri: Digital work is here and it will grow. There may be inequities in how it grows, but that’s a directive for us to think about who will be excluded. We need to ensure that there’s an environment, especially a policy environment, in which work is fair, trustworthy, and protected.
- Can Platform Data Expand Access to Transformative Credit?
- Financial Inclusion is Key to Fulfilling the Promise of Platform Work
- Financial Inclusion, the Gig Economy, and Digital Finance
- How Can Embedded Financial Services Better Serve Platform Workers?
- Playing the Long Game: Women’s Platform Work and Financial Services
Mobilizing Finance for Development (MF4D) Webinar Series Resources
- Mobilizing Finance for Development Marketlinks Course Landing Page
- Mobilizing Finance for Development – A Comprehensive Introduction
- Vignettes Handbook – Mobilizing Finance for Development
- Finance Wiki on Marketlinks