PayPal Stories Archive

 

The rise of artificial intelligence (AI), machine learning (ML) and automation, the proliferation of Internet-based technology platforms, and the move toward more entrepreneurial sources of income are combining to fundamentally shift the ways in which people work and earn a living. But whether this shift will lead to greater prosperity and equality will depend on us. Today, we have the opportunity to build new financial services to better serve the needs of those in the new global workforce who may be particularly underserved by existing products and services.

 

Today’s financial services were primarily designed to serve people who were employed at a nine-to-five job by a single employer, oftentimes for their entire careers. For example, payments, savings, and wealth management systems were set-up based on the notion of a stable, bi-weekly income. But changes in the way money is earned must be accompanied by changes in the way money is paid and managed. By doing so, we can work to enable the financial health of a new generation whose incomes are variable and who have more personal responsibilities related to things like retraining and retirement.

 

Consistent with our mission to democratize financial services, we’ve been focusing on the fact that that the way people work in the future will impact the way the financial services industry needs to serve them. Accordingly, PayPal commissioned the first global survey[1] of its kind to understand how financial services need to evolve to better support people as they earn and spend their income.

 

From the survey findings, we found four key trends that are expected to shape the global workforce in the coming years, and identified ways that the financial services industry will need to evolve to meet these changing needs.

 

Over 90% of net employment growth from 2005 to 2015 in the US was in the “alternative work” category, which means that nearly all of the 10 million jobs created between 2005 and 2015 in the US were not traditional nine-to-five jobs. People are increasingly likely to earn an income through online platforms. PayPal, too, has seen similar trends, as the total payment volume (TPV) of platform companies that use PayPal grew on average 47% year-over-year (YOY) between 2014 and 2018.

 

This growth in the platform economy is providing workers with many financial benefits, including better resilience to cover expenses even if their main income source is lost. However, income earners on these platforms still have significant unmet financial needs. For example, 51% said they have paid a bill late and incurred fees over the past 12 months.

 

Faster access to income could enable these workers to better manage their financial lives. 63% of platform economy workers surveyed said they prefer to receive income from work more frequently.[2] PayPal has seen similar trends. For example, real-time payments to platform economy workers through PayPal’s recently-acquired Hyperwallet platform have increased by more than 200% YOY.

 

40% of the world’s jobs could be automated within 15 years, and a recent McKinsey study found that 75 to 375 million people may need to switch occupational categories in the next decade and learn new skills.

 

But people and families aren’t financially prepared. In our survey of 8,000 people, we found that only 38% of workers in jobs that are at a high risk of automation have savings to cover six or more months of expenses if they lost their primary source of income.

 

The financial services industry will need to build solutions that encourage short-term savings and create new credit offerings that are forward looking, which can enable workers to retrain for new positions or take on more entrepreneurial endeavors in a rapidly changing economy.

 

For a variety of reasons, people are turning to more entrepreneurial activities, like starting their own business to earn a living. While the study found that small business owners are more financially resilient and confident about the future than traditional nine-to-five workers, only 46% of small business owners surveyed reported making consistent income each month, compared to 72% of all survey respondents. In addition, 55% of small business owners reported paying a bill late over the last 12 months, a higher percentage than any other demographic group studied.

 

To help alleviate some of this, 77% of small business owners said they would prefer receiving their income more frequently, a key recurring theme that emerged from the survey. New solutions must be developed to meet these changing needs. For example, with the recent launch of Funds Now, PayPal is aspiring to make immediate access to funds the norm rather than the exception for small businesses. Still, more needs to be done.

 

We also need to build better financial management tools and credit solutions for these small business owners to help support them as they continue to increase economic opportunity, jobs, diversity and the overall health of our communities.

 

34% percent of the millennials surveyed said they have multiple jobs, compared to 25% of Gen X-ers. Millennials favor flexibility and seem comfortable with more frequent job transitions. A 2016 Gallup poll in the US found that 21% of millennials reported changing jobs within the year, more than three times the number of non-millennials. Like respondents from emerging markets, millennials are 16% more likely to prefer receiving their income through digital payment apps as compared to their Gen X counterparts. Interestingly, survey respondents in Brazil, China, and India were 54.5% more likely to prefer receiving income from work via digital payment apps.

 

To better serve this emerging demographic of workers, the financial services industry needs to democratize access to robust digital financial management tools that can account for multiple income streams and help workers prepare for and manage volatility in earnings.

 

 

Bill Ready, EVP and Chief Operating Officer, PayPal