The Financial Brand Insights - Spring 2022

In 2022, financial institutions will be especially vulnerable to losing small business banking clients to newer and sleeker fintech providers. This bold declaration came from The Financial Brand in early January and kicked off the new year with a strong call to action for banks and credit unions. “Cash flow can be a nightmare for small businesses,” Segmint co-founder Rob Heiser and Autobooks VP of Marketing Derik Sutton agreed during a recent webinar about small business banking. “It is also a nightmare from an accounting and tax perspective, trying to aggregate all of these separate payment channels…credit cards, cash, Venmo, Zelle, Paypal, etc. It’s a lot for the individual proprietor to manage.” This year, it will be necessary for banks and credit unions to create a small business product suite, and one necessary weapon in that arsenal will be in the form of payment services. Industry surveys reveal that a big draw to fintechs are their treasury technologies. For financial institutions, that makes investing in or partnering with technology firms to provide business account holders with access to fast, secure and low-cost payment engines a top priority. Transaction Data Tells a Story Transaction data holds a gold mine of information about account holders, and financial institutions should capitalize on the revenue opportunities this data can reveal. We did some digging into our own institutional data, and discovered that there has been an increase across the board showing consumer accounts accepting payments from providers of alternative income (sources of money earned above and beyond a person’s regular income) as well as business related expenditures. The statistics below were observed across institutions of all sizes: • An average of 2.35% of consumer accounts were receiving funds from a merchant processing account. • 1.35% of consumer accounts were paying a payroll service provider.

• 5 out of 1,000 consumer accounts are working in the gig economy, as a ride-share driver or a food delivery driver. • 3 out of every 1,000 consumer accounts are selling on Etsy. While these numbers may not seem earth shattering, they reflect a real shift in the way Americans make income and operate small businesses. Consider that in 2020, the gig economy grew by 33%, expanding 8.25 times faster than the U.S. economy as a whole, according to Small Business Trends. Gig workers now represent about 35% of the workforce, up from between 14% and 20% in 2014, Forbes reports. That means 57 million people in our country are leveraging freelance or gig work — contributing $1 trillion dollars to the economy annually. Experts predict that this will continue, and that half of the U.S. workforce will be freelance contractors in one way or another by 2023 (figure 1). Banks and credit unions need to pay attention . How the Gig Economy Affects Consumer Banking A paycheck is still the most common source of income, but as we mentioned earlier, the

The Gig Economy: How Banks Can Find Hidden Revenue Opportunities By Segmint

Figure 1

Gig economy’s contribution to U.S. GDP



7.6% Professional, scientific, technical services







3.2% Transportation and warehousing

1.6% Mining

THE FINANCIAL BRAND ©January 2022 SOURCE: Upwork, 2019/Business Insider





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