The gig economy presents many challenges in its reliance on a freelance workforce. Among those is the task of managing corporate spending for workers that don't use a corporate card or expense platform.
A New York-based fintech Extend hopes its virtual cards can stand in for conventional expense management systems. The challenge for Extend is that it must make the case that its product makes more sense than simply reimbursing workers through common P2P apps like Venmo and Zelle. But it also draws on those apps for inspiration.
“We look at it as incorporating what consumers would do to move money seamlessly via a Venmo type experience,” said Andrew Jamison, one of Extend's founders. “With two or three fields you can move funds.”
The trend in corporate T&E has actually been moving in the reverse direction, with enterprises turning to the likes of
In this model, workers must still file for reimbursement. Guillaume Bouvard, another Extend founder, said that in his experience working in travel expense processing, that’s about 20% of corporate employee expense payments. “That’s a potential loss for the employer, since the personal credit card gets the rewards for payments,” he said.
Within the gig economy, a common solution is to use faster payments to employees who cover their own expenses, such as a
This system is less palatable in situations where expenses vary day by day, and the payment may not come until the end of a project.
Extend’s founders say a virtual card — linked to the employer's card account — provides an answer for those scenarios.
“It’s a challenge for an employee or a freelancer or contractor to file an expense report,” Jamison said. “Often these expenses go to the worker’s credit card for later reimbursement. That’s further complicated by younger freelancers that may not have a credit card. Then there’s the reimbursement process, which can take weeks to process.”
Extend’s bank clients, which it did not identify, enable their business clients to send virtual cards to named employees—usually a freelancer or a full-time employee who works for a small business or who does not travel frequently. It’s not a true funds transfer—the recipient accesses and requests the credit line through their email address. Extend charges the cardholders a 0.5 percent per transaction with no fees for the recipient.
These card transactions gain points and other benefits for the employer and provide transparency into purchases. A cardholder can send a virtual card with a $500 spending limit that is valid between two specific dates.
The gig economy attracted
“One area that is likely to see the most impact here is the growth in prepaid cards for business use,” said Gilles Ubaghs, a senior analyst at Aite. “This can allow businesses to more directly control spending, with restrictions on the type of transactions possible.”
The specific T&E use case for gig workers is new, but added much of the broader expense account market does still veer towards pay now and get reimbursed later, Ubaghs said.
“Where were seeing a lot of activity now is in areas like instant approval for spending via mobile channels, which opens up possibilities for things like pushing prepaid virtual cards to mobile wallets pretty easily which could be very useful for gig workers, but that’s still at a relatively early stage of development," Ubaghs said.
