The Contingent Workforce and Services (CW/S) Insider’s Hot List: September 2019

Welcome to the September 2019 edition of Spend Matters Insider’s Hot List, a monthly look at the contingent workforce and services (CW/S) space that’s available to PLUS and PRO subscribers. For those new to the Hot List, each edition covers the prior month’s important or interesting technology and innovation developments in the CW/S space.

In last month’s Hot List, our subjects included two partnerships, one between Beeline and Avature and another, between Aon and Bunker. Developments at Fiverr and Talmix were also spotlighted. We also looked, through the eyes of the National Council on Compensation Insurance, at the somewhat dubious question of whether the gig economy is overhyped. We provided an overview of developments in the fast-moving, growing freelance/small-business banking sector. And we also took a walk on the wild side, examining a new organization that is building “the world’s first employment ecosystem designed to empower the ‘self-sovereign worker’ ” and “will feature guilds called Decentralized Employment Organizations (DEOs).”

Now Labor Day is behind us, summer vacations are over and the days are getting shorter. But before we can reset our clocks, we still must check the August temperature readings and  survey last month’s developments the CW/S space. We’ll look at several hot topics: Upwork’s review of disagreements about the size of the freelance economy, changes in worker classification, drone deliveries, a funding round by healthcare jobs marketplace provider Nomad Health, and how freelancers are changing banking and finance.

Upwork clarifies competing gig/freelance economy estimates

Upwork’s newly hired chief economist, Adam Ozimek, undertook some important work in August: to try to explain how different estimates of the gig/freelance economy vary widely. Ozimek presents his findings in a brief, lucent article. If you have been puzzled and/or troubled by these different estimates and would like to get a better grasp of how it all adds up, have a quick read of Why Estimates of the Freelance Economy Disagree.

Unfortunately, when it comes to freelancers, the disagreement doesn’t end there.

Worker classification gets even dicier

In August, the National Labor Relations Board held that employers are not in violation of federal labor law if they misclassify their workers as independent contractors instead of employees. That said, it doesn’t stop workers from suing for back wages if they are considered to be misclassified under some other legal regime, nor does it mean that employers cannot be taken to task by the IRS.

At the state level — and possibly more import — the California State Assembly passed the AB 5 legislation, and it will be going to the state Senate in mid-September. According to the Los Angeles Times, AB 5 is “a measure to curb the widespread use” of independent contractors across the California economy that “would change the employment status of more than a million Californians” and “could set a precedent in a national battle to improve pay and benefits for low- and middle-wage workers.” The Times noted that “janitors cleaning downtown office buildings, truckers loading goods at the ports of Los Angeles and Long Beach, construction workers building new homes, manicurists, medical technicians, nightclub strippers and even software coders would be among scores of occupations offered protection against long-documented workplace abuses.”

But not everyone sees it the same way. The libertarian media site Reason’s recent article, “New Employment Regulations Could Destroy California’s Gig Economy,” quoted Jarrett Dieterle, a fellow with the free market think tank R Street.Dieterle argues that “the mass reclassification of contractors as employees risks destroying the flexibility that has made gig-economy work so valuable for so many.” “Most workers who become freelance contractors or join gig-economy platforms do so to smooth income volatility,” he said.

Furthermore, Uber, Lyft and DoorDash — not surprisingly — said they would spend $90 million to fight the proposed law. But they are trying to reach a deal with the California legislature and Governor Gavin Newsom. According to the New York Times, “the companies said their proposed ballot initiative would preserve drivers’ ability to set their own schedules, while Uber and Lyft would offer a concession on minimum wage standards, health benefits and collective bargaining rights.”

All we need now is to bring autonomous vehicles or drones into the mix, then we’ll have a real controversy.

Did someone say drones?

Well, say no more. An August press release, reported “drone company Flytrex and the drone services company Causey Aviation Unmanned Inc. (CAU) received approval from the Federal Aviation Administration (FAA) to begin food deliveries by drone in Holly Springs, North Carolina.” The program is a part of the FAA’s UAS Integration Pilot Program (IPP). According to the press release, “the announcement followed the recent validation of Flytrex’s self-triggered parachute recovery system by NUAIR (Northeast UAS Airspace Integration Research), according to standards set by the FAA and the American Society for Testing and Materials (ASTM).”

It’s early, but Flytrex and Causey are now a part of a tiny group of companies authorized to operate in a suburban area. In general, commercial drone services fall within a complex but apparently navigable, regulatory zone that is being developed as the drone industry grows. Goldman Sachs forecasts that between now and 2020, civilian drone services represent a $30 billion market opportunity (military, another $70 billion).

In August, Drone Industry Insights (DRONEII) introduced its first Drone Service Provider (DSP) Ranking 2019 Report. While DRONEII currently tracks over 700 DSPs, the report ranks and analyzes the top 40 providers in 18 countries (see, top 20 providers below):

Source: https://www.droneii.com/report-drone-service-provider-ranking-2019#1525106654181-a2b63cd6-e0c3

The report stated that the most common applications of commercial drones are by far mapping, surveys and inspections; but it also noted the growth of the entertainment segment of the drone industry.

For service procurement category managers in many industries, drone services may be coming home to roost (if they have not already). A Boston Consulting Group article forecasts that “services that operate drones and manage drone data for end-user companies, rather than drone manufacturing, will generate most of the value because most end-user companies will turn over actual operation and maintenance of drones to third-party services.” Can we imagine drone services in a services e-catalog?

Looping back to the evolving world of work, it so happens drones are often piloted by independent workers (which makes sense, for a number of reasons). Hence, we can point to drone pilot platforms. For example, PrecisionHawk’s Drone Pilot Network reportedly provides “independent drone operators access to flight servicing opportunities from the world’s leading enterprises.” Dronebase has a similar model for qualified pilots:

And Dronebase even has an app for that:

Nomad Health finds a new oasis

According to an August press release, Nomad Health — which bills itself as “the first online marketplace for healthcare jobs” — completed a $34 million funding round led by Icon Ventures. Since 2015, Nomad has raised $50 million in total equity funding, according to Crunchbase.

Nomad co-Founder and CEO, Alexi Nazem, M.D., was quoted as saying: “‘This financing clearly validates our success and, more importantly, provides the fuel to support our extraordinary growth. Nomad is on a mission to eliminate every obstacle between providers and their patients by building a modern healthcare workforce platform.”

The press release asserts that the marketplace “has seen sensational growth” since it was launched three years ago and it “now hosts jobs from over 4,000 healthcare facilities across the United States, including positions at many of the top-rated hospitals in the country.” The press release elaborates: “[30%] of jobs on Nomad are located in non-metro areas where clinician shortages are gravest. The nearly 100,000 clinicians on Nomad, 45% of whom are actively looking for work at this moment, have answered the call to serve and taken jobs in 46 states across the country. As a result, the company’s revenues have grown nearly 500% in the last 12 months.”

Nomad Health also announced that healthcare staffing veteran Bob Livonius has joined its strategic advisory board. According to the press release, Livonius “introduced the Managed Services Provider concept to the healthcare staffing industry while CEO at Medfinders and, following the sale of Medfinders to AMN Healthcare, helping to grow AMN into an industry leader as its president.”

Freelancers challenge banking and insurance sectors

One of our ongoing Hot List threads has been the emergence of various financial services for independent, freelance, gig workers and very small businesses. Indeed, development in this area continues unabated, and August was no exception.

N26 is live in the U.S.

In our January 2019 article, Freelancers and Fintech — Follow the Money, we covered a number of “challenger banks,” including N26, a Germany-based online-only bank that had just completed a $300 million Series D round. We noted that N26 launched its prepaid debit card-based, digital banking offering suitable for freelancers and micro-businesses in 2017, and, in 2018, it introduced N26 Business Black, “only available for freelancers and those who are self-employed.” At that time, N26 was laying the groundwork for its entry into the U.S. market.

In August, N26 announced that it is now available to U.S. consumers nationwide after completing its two-month beta program. According to the press release, “U.S. residents can download the app directly from the Apple App Store and Google Play and apply for an N26 account and Visa debit card powered by FDIC-insured Axos Bank in five minutes.” The press release also noted that “N26 will accompany its nationwide product launch with a new brand campaign that will be seen on buses, trains and taxis across New York, San Francisco and Chicago.” While it’s not clear that freelancer-specific offerings have been launched in the U.S., one can imagine that it is only a matter of time.

Radius Bank and NorthOne go for broke (kind of)

In August, U.S.-based Radius Bank, a self-proclaimed, “forward-thinking digital bank,” announced a partnership with “challenger bank NorthOne, a mobile-first, API-enabled banking platform.” According to the announcement, NorthOne, founded in 2016, provides an iOS mobile app that serves “the unique needs of small businesses, freelancers and startups.”

The press release states there is a “gap between banking and financial management for small businesses, startups and freelancers — audiences that have historically been underserved by legacy banks.” NorthOne, the press release continues, “tapped Radius to power its FDIC-insured business checking account and debit card, while utilizing the API technology built by the Bank and its development partner Treasury Prime for digital account opening and account management.”

According to the announcement, “NorthOne offers banking services with the integrated functionality of a finance department that small and micro businesses traditionally could never afford. These include, 3-minute digital account set up; customizable sub-accounts for taxes, payroll and big purchases; instant debit card management, real-time insights into revenue and expenses, et al.”

Eytan Bensoussan, CEO of NorthOne, was quoted as saying: “I’ve interviewed hundreds of business owners and I’ve found that many folks aren’t interested in speaking with relationship managers or going into the branch. Many of these entrepreneurs are looking for self-serve options with features that help them with their finances, rather than get in the way. With API-powered banking, NorthOne empowers business owners to take control of their financial health.”

Joust Labs completes $2.6 million seed round

In August, PTB Ventures announced that it led a $2.6 million seed round for “neobank” Joust. Founded in 2015, Joust refers to itself as “the nation’s first, all-inclusive banking platform for independent professionals.” The round also included Accion Venture Lab, the seed-stage investment initiative of global nonprofit Accion; Financial Venture Studio; and Techstars.

According to the press release, Joust “provides freelancers, sole proprietors, and small and midsize businesses in the United States with tailored financial services to manage and smooth their unconventional cash flows. It has developed an invoice guarantee product, PayArmour, which allows users to access a cash advance against unpaid invoices. Joust bundles PayArmour with a suite of financial services, including (an FDIC-insured) bank account and payments processing, offered through one mobile platform.”

According to Dave Fields, founder and managing partner of PTB Ventures, “freelancers require credit and banking products that mirror the user experience of the consumer market but the product sophistication of the small business market. Existing financial market infrastructure just isn’t built to provide this bundle. Through the use of contextual data and proprietary risk algorithms, Joust reduces the cost, complexity and risk of becoming a self-employed worker.”

Granting credit to freelancers

As you could probably tell from the above, independent workers (on account of their choppy payment flows) have a need for short-term credit solutions that can help to smooth out their cash flows; and we are seeing challenger (aka neobanks) rising to the occasion to attempt to help with this problem.

SpendMatters has been following the growth of one non-bank player, QWIL, since 2016. It states that it “empowers freelancers with instant cash, payment tracking and supports numerous funding methods.” And that it does, and does it well. Coincidentally, in May 2019, Drone Base started using QWIL “to automatically manage and pay the freelance drone pilots who use the DroneBase platform,” according to a TechTarget article.

QWIL and the new challenger and neobanks have begun to address this specific problem of on-time payments and short-term credit around freelancer invoicing and payments, et al. Now a new player has entered the fray to tackle the problem of longer term credit — in particular, mortgages, which are extremely difficult for independent/freelance workers to obtain.

According to an article published on media site, AltFI, London-based Tandem Bank “is working on a new mortgage aimed at freelancers and those in the gig economy” who, according to Tandem, are “particularly vulnerable to rejection and unfavourable rates as they often lack a clear, regular source of income to share with lenders.” Tandem is further quoted in the article, saying it is “developing a new method of credit scoring based on a customer’s aggregated financial data, effectively building a more rounded picture of how they borrow, spend and save” using its banking app.

But the bank is not yet taking applicants yet. Reportedly, once Tandem designs its new mortgage (which apparently is being done using crowdsourcing), it plans to beta with a small group of customers by the end of this year. A full launch in the UK is expected in 2020.

So that brings the September 2019 installment of the Contingent Workforce Insider’s Hot List to a close. We plan to be back with more in October. In the meantime, remember: When you’re hot you’re hot, when you’re not you’re not.