Gig work has exploded in popularity in recent years, with over half of the US population expected to gig work, at least occasionally, by 2023. Yet, the changes in our global idea of work haven’t taken hold in all industries - at least, not to the same extent. In food services, for example, a shortage of in-person labor has created a massive boom in gig employment. The advantages for both employees and companies are well-documented. Employers enjoy the ability to scale with demand while employees themselves have greater flexibility than with traditional employment contracts.
Despite these advantages, certain industries have been more reticent to adopt gig workers, if they’ve hired any at all. While banks and other financial institutions could lower costs and improve results by hiring gig workers, gig workers in financial services make up a mere 8 percent of the overall market. Regardless, banks are adapting to a growing, tech-driven economy in their own way. The methods they use to meet this demand have major implications not only for gig work, but for the very nature of employment as well.
Why banks don’t hire freelancers
There are three main reasons why banks are hesitant to hire gig workers:
- Security Risks. Given that the average data breach costs $3.86 million, banks understandably prioritize reducing the possibility of leaks, whether malicious or unintentional. The massive amount of customer data available to workers means security is a top concern. Bringing in outside talent to oversee this data often looks to managers like a leak waiting to happen - even if the workers are trustworthy and vetted, as they often are.
- Cost Efficiency. Recent payroll reforms in the UK have changed the very definition of what it means to be a contractor. If regulators or government agencies decide that a contractor is actually an employee, the resultant increase in payroll taxes can negate any advantages. The advantages employers gain from hiring gig workers disappears in these cases, which act as a barrier to hiring contractors.
- New Regulation. California’s controversial AB5 law essentially outlaws gig work, with few exceptions. While this legislation was aimed particularly at Uber and Lyft, banks are well aware of their need to keep within the law or else face the consequences later, particularly when their reach is international.
Gig versus AI for rote
None of this means that rote tasks which could be performed gig workers don’t exist within the banking industry. There are a number of crucial tasks that a contractor could apply their talents to, if banks were willing to hire them. One example labor intensive business function is transaction reconciliation; the process by which related financial transactions are matched together, e.g. matching each invoice to the corresponding bank transaction. Automation of this process is typically not 100 percent, and any manual decisions made must ideally be verified by two employees to ensure accuracy. In case any errors are made, managers go back to the particular worker involved with the transaction to see where the mismatch was made.
This kind of rote work can be performed by gig workers. Temporary employees can better avoid the mental fatigue and cognitive dangers associated with repetitive tasks by moving onto other duties when the work becomes rote. Highly educated full-time employees are freed up to apply themselves toward more strategic and creative work, thereby increasing employee satisfaction and retention. Banks have dozens of these sorts of tasks that could be made available to gig workers, were the legal and ethical concerns not present. However with the worker legal concerns coupled with scalability considerations, banks are instead turning to AI at a remarkable rate to address these tasks, with AI investment in banking expected to reach nearly $450 billion by 2024.
Does AI mean the end of gig work?
Human oversight, human touch, human creativity
Banks that have successfully adopted AI in their business processes are faster, more accurate, and more automated than their competitors. While AI does mean less rote work for humans (whether they’re full-time or gig workers), banks still need someone to handle quality control for the overall process. Essentially, this means having human oversight and verification working in tandem with cutting-edge AI.
In addition to this human oversight role, AI can never be a replacement for the human touch, which is ever more important for customer interactions in the “experience economy”. Gig workers can help organizations provide more comprehensive services and faster response times for customers who want to interact with someone who can fully understand and solve their problems. This isn’t just good for retention - customers are willing to pay up to 16 percent more for better customer experience. More spending on gig workers can therefore actually mean better profits.
Bridging the AI Gap
Beyond customer experience, one major employer benefit of the gig economy is the ability to find someone with a niche skill set. A specialist can be the right hire for a one-time or temporary project, but only if they have the opportunity to be hired.
Since the vast majority of banks are barred from hiring on platforms that provide freelancers, their options are limited when it comes to short-term projects, such as training video production. The project must either be handled by an in-house team, or sourced out to a consulting firm - a decision that increases project scope and budget considerably.
Startups, on the other hand, mesh well with freelancer platforms. Managers can directly view the profiles and portfolios of multiple expert gig workers,giving them the option of who to hire for a one-time project. If this freedom can expand to the banking industry as well, the potential for change is substantial. Collaboration between AI, gig workers and enterprise can improve efficiency, accuracy, customer experience and creativity, driving new opportunities for workers and employers alike. However, the gap between what is beneficial and what is possible remains large, particularly in a massive sector like financial services.
Banks are restricted by the regulations and legalities necessitated by their services. It’s up to organizations, societies and governments to help bridge this gap, creating a new role for gig workers in an industry often hesitant to adopt new changes.