68% of 1099 Workers Will Change Banks in the Next 12 Months — Here’s How to Get Them To Choose Your

Most bank accounts are simply a place to store money. But what if a bank account could be a comprehensive business resource for a growing market like independent workers? In fact, independent workers are waiting for banks to take their needs seriously, and are willing to leave their bank to find better options.

In our recent report on “Banking the Independent Economy,” we found that independent workers are not just dissatisfied with their banking options, but they’re looking for banks who can offer features and tools that will make their daily financial and administrative tasks like setting aside tax payments, budgeting, and invoicing easier.

“The future of banking for independent workers isn’t just about keeping their money safe — it will be about creating a more personalized product for how they do business,” says Michael Rangel, Founder and CEO of Novo. “For independent workers, the most valuable commodity they have is their time. In the coming years, I anticipate we’ll see many more banking products give independent workers the tools to accomplish all of their banking needs in minutes, right from their phone, which will give them more time to focus on doing the actual work that makes them money.”

They’re a 68 million-strong market waiting for the right bank to come along. Here's what to know if you want to create accounts and features that will draw them in.

You need to know who they are

Independent workers are known by a variety of terms and roles: freelancer, independent contractor, gig worker, on-call worker, and more. Sometimes they're fulltime and sometimes they pick up extra work on the side. They have many different reasons for doing it, too, and according to a report by Upwork, independent work gives individuals multiple options of earning, allowing them to participate in “a diverse range of work … that traditional employment would struggle to replicate.” This is especially true for younger generations, as 53% of Gen Z are independent workers, as opposed to just 29% of Boomers.

Whatever they do and however they do it, the group is growing. The current 68 million workers is expected to grow to half of the US population in just four years. Additionally, half of full-time employed workers are considering leaving their workplaces for independent work. Additionally, the number of individuals with side gigs rose 5.3% to 15.8 million, from 15 million in 2019 — which is up from 10.5 million in 2016.

 You need to know their pain points

When it comes to taxes, benefits, and withholdings, independent workers have a very different experience than W-2 employees. Those who receive a paycheck from their workplace already have tax payments, health insurance, retirement contributions, and other benefits taken out. But independent workers don't. Whatever app payout, ecommerce sale, or paid invoice they receive, independent workers need to calculate their own taxes and set aside a portion to be paid quarterly. Even The New York Times calls tracking taxes for independent workers “always complicated,” quoting a freelancer daunted with the process of filing.

They also need to find their own health insurance (only 4% of gig workers are offered health coverage), manage retirement contributions, track their expenses and deductions, and more. Not only are independent workers working, they also function as their own HR department — and that creates a lot of pain points.

 You need to know that they're unhappy with their bank

Our report found that only 51% are "very satisfied" with their current bank accounts, and that 68% plan to look for an entirely new bank in the coming year. They're dissatisfied with their bank because of the high fees, like maintenance fees and overdraft fees. They are also dissatisfied because of poor customer service they receive.

But while poor customer service and high fees are common dissatisfaction points for everyone, independent workers noted another important reason for dissatisfaction: a lack of account features.

 You can solve their pain points by offering new features

Independent workers are looking for bank accounts with features that can help them manage their day-to-day finances, track expenses, budget for taxes, and more. Want independent workers to choose your bank when looking for a new account? Offer them these features. 

You need to offer ways to set aside portions of income

Want to help independent workers solve their tax concerns? Create a banking app that automatically calculates how much they'll owe in taxes, and set it aside in a separate account. This will not only save independent workers the effort each time they receive income, but it'll help them actually pay their estimated tax payments. We found in our report on the “State of Taxes in the Independent Economy” that 40% don’t set aside income for their taxes and 42% say they can’t pay their quarterly estimated tax payments.

Independent workers want to see this kind of automated earmarking for other types of needs as well, like retirement savings, social security payments, health insurance payments, and other expenses.

 You need to offer ways to categorize and identify expenses

Since independent workers need to track their expenses, they're looking for banks to offer features that can identify tax deductions — those that they know about and those that they don't — as well as tag and categorize business expenses that they can use for budgeting, business planning, and tax purposes.

You need to offer business tools to make their life easier

Independent workers are looking for ways to make their work life easier in general. So why not integrate business tools like budgeting and invoicing capability into the bank account? The idea is to streamline their work experience, and make their administrative tasks more efficient.

Next Steps for Banks

The independent economy is scaling rapidly — so will banks keep up? Will they create features and tools that will provide a comprehensive business management system for these new customers? Or will banks continue to tweak the same old accounts, and miss out?