Community bank, fintech team up to serve gig-economy workers

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Executives at Somerset Trust Co. in the past year began to sense a business opportunity in the growing number of gig-economy workers — albeit a special brand of them — in the rural Pennsylvania counties it serves.

“There is a certain expectation when you talk about the gig economy that it only applies in an urban setting,” said Allison Cook Hoffman, vice president of marketing and customer experience officer at the Somerset, Pa., bank. “We don’t have Uber drivers here, but over-the-road truckers. It’s much more blue-collar, the mom and pop contracting company that doesn’t hire their employees but keeps them on payroll as a de facto freelancer.”

Gig-economy labor force

The number of challenger banks promising to help contractors and gig workers run their businesses is booming, and bookkeeping services that already serve this clientele are joining the fray by offering digital bank accounts.

Somerset Trust, founded in 1889, is trying something a little different to reach the same audience.

To help prospective customers with independent or side-gig income stay current on their quarterly taxes and track mileage and other deductible expenses, the $1.5 billion-asset Somerset partnered with RoamHR, a financial platform that assists the self-employed with such tasks, to layer these freelancer-friendly features on top of its existing accounts.

“That’s way different than what you are seeing a lot of fintechs doing by becoming a challenger bank,” said Rick Gonzalez, founder and CEO of RoamHR. “We’re turning the tables and saying these banks already have the customers, the existing relationships, the marketing and the service know-how.”

The partnership shows one route that traditional banks can take to improve their overall offerings for independent workers. PNC Financial Services Group's “indi,” a mobile-only bank account for gig-economy workers that was developed in PNC's fintech incubator, is a similar product.

“We try to give freelancers, contractors and the self-employed the same benefit a W-2 employee has where taxes are just managed for them,” Gonzalez said.

Somerset realized there was a market for this kind of service last August, when Gonzalez attended the bank’s annual FinTech Day, a community event where Somerset invites both vendors and customers to showcase its technology.

The bank initially saw this partnership as a way to draw in new customers and increase deposits, but it soon realized that many of its existing customers are self-employed or have a mix of W-2 and 1099 income. More workers are likely to turn to contract positions, or even multiple gigs, to get by as traditional employment dwindles.

After users open an account on the Roam Gig Suite landing page, which they can navigate to from the Somerset website or from social media ads, they can download the RoamHR app and log in to connect their primary checking and tax-withholding accounts. These accounts will be similar to accounts Somerset already offers.

When customers receive deposits in their checking accounts, RoamHR figures out how much tax should be withheld to pay quarterly taxes and automatically moves the correct amount to the separate tax-withholding savings account.

“The money moves in real time, like the bank is doing it on its own native mobile app,” Gonzalez said. The app can transfer funds and show balances because RoamHR connects directly to Somerset’s Fiserv core.

Right now, the product is meant for new customers, but the next phase will offer the same benefits to existing customers.

The product also tracks expenses and mileage, and enables users to send invoices from the app. Customers can categorize purchases from their checking accounts in the app as business expenses, and RoamHR will take those into account when calculating net earnings and the amount it recommends customers set aside for taxes. The app also uses the mobile device’s GPS to monitor business trip mileage.

RoamHR charges banks an integration fee and a small fee per active user per month, but it does not charge bank customers any fees.

"The biggest challenge for anyone who is self-employed or a gig worker is they’re not always sure when they can expense something,” Gonzalez said. “Our app helps them recognize what they can deduct and keeps track of those deductions throughout the year.”

The final piece is a “Gig Solution” debit card from Mastercard that offers discounts on software, automatic rebates at certain merchants and more.

Somerset Trust is the first bank to partner with RoamHR, and the service is set to launch on Aug. 17. The fintech says it has several other bank partnerships in the works.

“We have talked to a lot of banks and credit unions in the last year, and the initial reaction you get is ‘we don’t want to service the Uber drivers,’” Gonzalez said. “The reality is, this market is so much larger than that. These are good customers for financial institutions.”

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Fintech Gig economy Community banking Digital banking Digital Banking 2020