The Overlooked Opportunity: Buy Now Pay Later For Freelancers

Buy-Now-Pay-Later (BNPL) providers have seen an incredible surge in popularity lately by offering consumers a novel alternative to pay anything they buy with weekly or monthly installments. The pandemic, which has boosted e-commerce demand, has acted as a catalyst for the advance of BNPL as an alternative to traditional financing methods.

Worldwide, the BNPL industry is expected to accelerate further and reach $680 billion (approx. €558bn) by 2025, with a compound annual growth rate (CAGR) of 13.23% from the $285 billion recorded in 2018. Europe is one of the regions where BNPL is most popular, with one in every five retailers offering this payment option to their customers. In Germany, nearly half of consumers have either used BNPL to make a purchase or are aware about the option.

However, one customer segment that arguably has the most to gain from the BNPL revolution but is overlooked are freelancers.

The rapid rise of digital banking for freelancers

The number of people opting to pursue a freelance career over a corporate one has continuously risen over the last decade. The origins of this transformation are manifold: more flexible working hours, higher autonomy and a shift in labor demand.

Here too, the pandemic has fast-tracked the trend. In the US for example, the proportion of the total workforce performing freelance work has increased to 36% during 2020. We see a similar trend in Germany, where the number of freelancers is on the rise.

Freelancers, a broadly defined category that includes independent contractors, consultants, and the so-called gig workers for example are estimated to contribute $1.4 trillion to the US economy. And it shows no signs of slowing down, with some estimates even expecting freelancers to make up the majority of the US workforce within this decade.

Incumbent banks, meanwhile, have been struggling to keep up with this budding group of independent workers. The lack of digital processes makes it expensive for incumbents to cater to this segment characterized by small ticket sizes and volatile incomes. Furthermore, rapidly evolving working modes in the self-employed economy require an agility that traditional financial institutions have difficulties accommodating.

This situation offered the ideal breeding ground for a new class of challenger banks specifically targeted at freelancers. Their bank accounts are kitted out with entire ecosystems of digital, freelancer-friendly services like tax advisory and automated accounting tools that relieve freelancers of their administrative burdens.

But, one all-important puzzle piece is still missing from the majority of these offerings: digital lending for freelancers.

The BNPL gap

Arguably, the freelance community can benefit more than anyone from the flexibility that BNPL offers. Specifically, buy-now-pay-later services can help solve one of the most burning and prevalent pain points for self-employed workers: short-term cash flow challenges.

Small financing can help freelancers bridge liquidity gaps caused by late payments or periods in which they face a dry spell with few or no assignments.

Moreover, it can be handy when they need to upgrade or replace the tools required for their profession - e.g., a camera for a professional photographer, an electric bike for a food delivery worker or a tool subscription for a graphic designer.

Since their livelihood often rests on a steady influx of assignments, freelancers are likely to prefer lending solutions that are unbureaucratic, fast and fairly priced. Consequently, the paperless, on-demand user experience characteristic of digital BNPL services lends itself perfectly to solve the short-term liquidity needs of self-employed workers. After all, the idea behind buy-now-pay-later is to offer the user maximum financial flexibility. And flexibility is what freelancing is all about.

Splitpay for freelancers in Germany

At Solarisbank, we already recognized the potential of BNPL a while ago. With our solution Splitpay, we enable any business to offer branded BNPL services, allowing their end customers to convert their payments into easy installments with a tap of a finger. Examples of our Splitpay partners include leading global organizations like Samsung and American Express who have integrated Splitpay into their respective retail payment services.

Now, we are extending Splitpay to meet the bursting demand for flexible freelance financing.

By integrating Splitpay, our partners can offer their freelance customers a state-of-the-art BNPL solution out of the box, empowering their customers to spend less time on financial admin, and more time running their business. Whereas getting credit from traditional lenders is typically strenuous for freelancers, both in terms of effort and costs, Splitpay gives partners the possibility to offer a paperless and fast application process coupled with a competitive APR that their freelance customers will love.

Incumbent banks, neobanks, payment service providers (PSPs), freelance marketplaces – any business that wants to make the lives of their freelance customers easier can integrate our seamless APIs into their offering.

Splitpay’s benefits

1. White labeled: Our partners have complete control over the branding and design of their frontend and customer journey.

2. 100% neutral: Thanks to our B2B2C approach, our partner remains the owner of the customer relationship from start to finish. We don’t offer any end-customer-facing services of our own that could compete with our partner’s brand.

3. New revenue streams: Both the interest revenues generated by the loans as well as the boost in transaction volume on their customers' accounts offer attractive sources of income.

4. Digital & automated: Splitpay is fully automated and can be easily integrated via API, enabling the partner to launch their own BNPL digital offering in as little as 12 weeks.

Opening the tap

The market has already ignored the needs of freelancers for far too long. It’s about time someone changes this. With the European BNPL market expected to accelerate its growth further and the share of freelancers rising at an unprecedented rate, the market for self-employed lending is facing of a potential of unseen scale. The only question that remains is, who is going to be the first to open the tap?