Freelancing craze offers challenger banks an opportunity

This has been called the summer of quitting, and at least three fintechs see opportunity in providing bank accounts and mobile apps for the droves of people who are leaving their jobs and taking up freelance work.

The fintechs Lili, Willa and Lance, provide mobile banking to people who have left the corporate world for freelancing. According to Statista, there were 59 million people doing freelance work in the United States in 2020, an increase from about 53 million in 2014. These neobanks view the needs of freelancers as a cross between small-business and consumer banking. They pay special attention to two weak spots these customers have: tax liabilities and invoicing challenges.

They’re following the classic fintech model of zeroing in on a problem or need that traditional banks aren’t focused on, and solving it in a technology-driven way. They’re testing ideas for this niche market that banks could borrow for themselves or partner with a fintech to deliver.

New York-based Lili, which launched in January 2020 and has 250,000 customers, is debuting a subscription-based service Tuesday called Lili Pro.

Liran Zelkha and Lilac Bar David, co-founders of Lili, have designed a banking account and app that automate some of freelancers’ money-related tasks, such as calculating and paying taxes and creating and sending invoices.

Lili provides a checking account and Visa business debit card. These and all of Lili’s banking services are offered through the $21.5 billion-asset Choice Financial Group in Fargo, North Dakota. Lili’s app tracks expenses and calculates taxes owed.

The Pro version includes advanced expense management, including the ability to categorize transactions and split transactions between work and personal life. It lets freelancers build an invoice in a few steps, send it to a customer and get paid. It also comes with a savings account.

“We’ve gotten a lot of requests in regards to savings because when we started, we were very focused on saving for your taxes,” said Lilac Bar David, Lili’s founder and CEO and former founder and CEO of Pepper, Bank Leumi’s digital-only bank and virtual assistant. But customers asked for the option to save for different goals including an emergency savings fund. Lili Pro pays 1% interest on savings.

Bar David’s team also created a credit product called Balance Up that gives customers access to as much as $200 credit for debit card transactions as a protection against overdrafts.

“We know that as a freelancer, your income is not stable,” Bar David said. “Sometimes clients are late in paying. We wanted to make sure that you do have access to available funds when you need them.”

The monthly subscription fee for Lili Pro is $4.99.

“We priced it as a cup of coffee per month,” Bar David said. “So it’s going to be affordable and available for every professional freelancer who needs access to the services.”

Overall, Lili’s founders say they are trying to automate banking chores for freelancers so they don’t have to.

“When we started Lili, our vision was to empower freelancers to balance work and life,” said Bar David. “We wanted to be in a position to help them grow their business and make sure that they have everything they need within just one app to solve banking issues, payment issues, expenses and so on so they would have more time to focus on building their business. As our customer base grew, we found out that there are more professional freelancers that are more mature within their business and we could serve them in a better way with different products.”

Lance, which is also based in New York, focuses on middle- to high-income freelancers and flexible workers.

“We see that most freelancers don’t work in only one job or field, so our banking platform can aggregate and manage across all income streams,” said Oona Rokyta, CEO and co-founder. “We assume that people don’t have a financial game plan when they’re opening a business banking account, so we provide one that works just as well on day one as it does five years from now.”

Lance will automatically calculate, budget and pay quarterly taxes. It automatically sets money aside each month in subaccounts to meet savings goals.

Rokyta will not divulge the size of Lance’s customer base but says it’s “competitive with the market.”

Lance’s banking partner is Blue Ridge Bank, a $2.8 billion-asset institution based in Richmond, Virginia.

Willa in Los Angeles has more than 10,000 freelancer customers and more than 150,000 on its waitlist, according to Aron Levin, chief marketing officer.

These customers tend to be creative freelancers and social media creators who work with brands and advertising agencies.

“When we started Willa, we decided to zoom in on addressing the largest problem that freelancers face today: getting paid for their work fast,” Levin said. Willa lets them quickly create and send invoices from their phone. It can buy a freelancer’s receivables and pay them as soon as they send out an invoice.

“By reducing both time to money and administrative work, our users can spend their time doing more valuable things and zero time waiting for their money,” Levin said. “There are lots of services, like PayPal, that let freelancers generate invoices. Still, they leave their users with the heavy lifting like chasing down invoicing details, sending payment reminders and waiting for 30, 60 and sometimes even 90 days to get their money.”

Levin agrees that, at least in the short term, this is the summer of quitting.

“Long-term, it’s a decade that will define the future of work,” he said. “We predict that more than half of the U.S. workforce will engage in the freelance economy by 2027. There are massive implications of this, and it’ll ultimately be great for the economy. But there’s lots of work to be done to support the future of work. The systems are old, outdated and built around the assumption that you’re either a corporation or an employee, so freelancers are stuck in-between. That’s the core problem we’re addressing with Willa.”

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