By Arjuna Costa
The COVID-19 pandemic and the accompanying economic dislocation triggered a significant shift in the lives of gig workers around the world. During the past year, gig workers scraped together unpredictable income, looked for additional work and sought help where they could get it, including from digital platforms and fintechs.
As a global fintech investor committed to financial wellbeing, we wanted to better understand the financial impact of the pandemic on Brazilian gig workers – how their livelihoods were changing, their coping mechanisms and their hopes for the future – so that we could help inform the service provider community on how to better serve the unmet needs of these essential workers.
The economic toll of the pandemic shifted so rapidly, from region to region, crushing one sector while boosting another, so we decided to conduct our research in three sprints – May, August and October 2020. With that aim, we launched a longitudinal study, called Brazil Overtime 2020, surveying more than 1,800 workers from May to December 2020.
Working with 60 Decibels and MEI Facil, one of our portfolio companies in Brazil, we found that 90% of gig workers experienced significant income loss in the first months of the pandemic. Despite decreasing consumption and dipping into savings, half of those initially surveyed could not cover their expenses for a week if they lost their main source of income. Six months later, however, some was stabilization and recovery taking place. 30% percent of respondents reported no month-on-month change and another 30% even realized a month-on-month improvement.
The results of the survey provided new insights and, in some cases, changed our assumptions on how to best serve these critical individuals and small business owners. Below are key takeaways from the Brazil OverTime 2020 research as well as our insights and thoughts. (The full report can be found at https://digitalhustle.flourishventures.com/brazil)
There’s an immediate and ongoing need for:
Brazilian gig workers stated that their financial goals were:
- paying off debt (32%)
- finding work with better pay (11%)
- upgrading their vehicles, most often their primary income-generating asset (11%)
Over the next two-to-four years, many respondents want to buy a house or start their own business. Financial solutions can help support these goals through debt negotiation, asset financing, and savings products.
Non-traditional credit through traditional channels
With COVID accelerating digital adoption, what type of a credit product interested these gig workers? Close to 40% of respondents preferred loans with larger monthly repayments, and a further 17% wanted a single bullet repayment compared to 29% who preferred small weekly repayments. This surprised us as we had assumed gig workers would smaller, more frequent payments given income volatility and the challenges of budgeting and saving when there are competing uses for the money. Fully 55% said they prefer to repay in cash – a reminder that while we have seen more payments move online due to the pandemic, many gig workers still wish to manage their finances in cash where they feel they have the most control.
In many markets, app-based lending has helped “thin-file” or “no-file” borrowers access low-ticket loans. Alternative credit assessment, which depends on digital data, can also make credit more affordable. Yet our research seems to indicate that Brazilian gig workers need non-traditional credit products from semi-traditional channels. This could be as simple as a digital lender offering some form of cash-in/cash-out network rather than an end-to-end digital process.
Insurance that is easy to understand
Although it’s a product notoriously hard to sell, 81% of those surveyed were interested in purchasing insurance, especially health insurance. However, those who were most interested in insurance also showed concern with how they would afford the premium. And for those not interested in insurance, they cited that they did not want to take on debt. This suggests a potential misunderstanding of how insurance works. As an industry, we have more work to do to make insurance products that are easily understood, tailored to the needs of customer segments like gig workers, and priced affordably.
Quality of Life Began to Stabilize in 2020
In our follow-on research sprints in August and October 2020, we re-examined the initial signals from our May research, to find out how gig workers in Brazil have navigated the crisis:
- At least 40% reported their quality of life decreasing, even in the last few months. For 30% of respondents, quality of life began to stabilize in October with no month-on-month change, and another 30% reported a month-on-month improvement.
- Still, a large proportion consistently reported having no hope. In May, it was 41%, and remained at the number in August before increasing to 45% in October.
- We saw some potential green shoots, with a small, but rising share of respondents reporting stable (11%) or improving (15%) income in the last few months of the year. 77% of respondents reported their income varied from month to month, suggesting work continues to be unpredictable.
Time for Banks, Fintechs and Policymakers to Come Together
Amidst their hardship and precarious financial standing, gig workers are finding ways to cope. Approximately 40% borrowed money, but only 1 in 5 from a formal source. Surely, there is an opportunity – and a dire need – for banks, fintechs, and policymakers to come together to provide solutions for these essential workers.
- Brazil Spotlight June 2020 report is available here: https://flourishventures.com/perspectives/digital-hustle-global-gig-economy-learnings-during-covid-19/
- Global findings available here: https://digitalhustle.flourishventures.com/
- Complete research findings are available on our interactive dashboard: app.60decibels.com/flourish-gigeconomy2020