By David Baga, CEO of Even.
Why a more inclusive approach to financial benefits is essential in the coming year
It’s no understatement to say that we’re in a period of upheaval when it comes to personal finance, particularly when we talk about how the economy works for hourly employees. The past few years have ushered in a more democratized approach to investing, a meteoric rise in the share of workers in the gig economy, and pandemic conditions have caused a major drain on an hourly workforce that demands more.
As we look ahead to 2022, there are certain trends emerging that represent tide shifts across multiple sectors in finance and payments, from how commerce is monetized online, to the fintech services people use, down to how workers are paid. Here are just a few predictions that I see shaping the world of finance and commerce in the coming year.
Embedded Finance Will Become More Ubiquitous
The way we shop online is in a constant state of evolution and ecommerce absolutely exploded during the pandemic, fast forwarding more than a decade. What began as dedicated ecommerce sites with integrated payment systems has given way to a much more distributed model of commerce. Social platforms are now just as ingrained in commerce as they are in content, which has democratized selling online to a more diverse base of retailers, service providers and content creators.
Simultaneously, a new generation of fintech startups have been developing the infrastructure for embedded payments, credit, investment and more. In short, we’re witnessing a redefinition of what online commerce is. In 2022, it’s safe to say that the trend of embedded finance will continue to grow, allowing more platforms to more easily monetize commerce in a seamless, fully integrated way, backed by purpose-built financial services infrastructure.
A Mass Rebundling of Services
The way consumers adopt services tends to be cyclical. For years, banks were the only game in town when it came to everything from checking accounts, to mortgages, to consumer payments. Then, as the services provided by banks became untenable—operating so many disparate products and ensuring quality is no easy task—consumers began to look elsewhere. Rather than looking to one provider to reliably handle every financial service, consumers began to take a piecemeal approach; they could turn to disparate apps to handle individual services in payments, mortgages, investments and more.
Putting the onus on the consumer to manage all of these disparate services is in itself untenable, however. As consumers are tasked with the management of an ever-growing number of apps to control every aspect of their finances, we can expect to see a rebundling of services into super apps.
Unlike in the past, however, these disparate services won’t be under the banner of banks. As we’re witnessing in other parts of the world like Asia, for example, apps like WeChat and Grab are becoming more and more prevalent and all-encompassing. What began as a messaging service and taxi app, respectively, are now responsible for a wide range of services from food delivery to financial services. We can expect the app fatigue that has set in in recent years to manifest itself more and more in a rebundling in 2022 and beyond.
Americans Will Gain More Control Over Their Finances as Antiquated Systems Prove Insufficient
Looking ahead to 2022, it’s clear that a larger conversation needs to be had about benefits and payment systems that face the American worker. For decades, the concept of benefits has been primarily reserved for salaried employees and other high-wage earners. While these jobs have the luxury of offering voluntary benefits to attract top-tier talent, hourly employees have different needs that require different, more immediate solutions.
We’ve already seen the effects of this neglect of the needs of the essential workers. As wages failed to rise with levels of productivity and inflation, there has been a drain on the workforce willing to take hourly jobs. As a result, more and more of the previously hourly working class have turned to jobs in the gig economy where they have better control over their hours and when they’re paid.
Moving forward, employers will need to prioritize benefits to attract hourly workers. And one of the main areas they can confront is how employees are paid. While the two-week pay period is generally accepted for salaried workers that aren’t living paycheck to paycheck, that arbitrary, bureaucratic lag time can make a huge difference in the personal finance of hourly employees. By offering on-demand payments that enable hourly employees to reap the benefits of their labor immediately, employers can not only work to attract more workers during the labor shortage, but give workers more control over their finances. In 2022 we can expect to see more employers of hourly workers taking cues from the gig economy to bring in a workforce that values flexibility.
The next few years will be a turning point in the world of finance, benefits, payments, and beyond. With any luck, the changes we’ll witness will have a net positive effect on the lives of everyone—not just the financially stable.