Ask the Expert: how is crypto changing payouts for gig workers?

For both customers and workers, the gig economy has brought more flexibility and faster gratification.

We sat down with our former CPO of Payments, Nicolas Cabrera, to learn more about the ways crypto is changing how individuals in the gig economy can get paid.

In recent years, I've watched the gig economy change how we get lunch, how we get to the airport, even how we get our new furniture put together. For millions of us, it has also changed how we work. For both customers and workers, the gig economy has brought more flexibility and faster gratification.

Except with payments. I've noticed that the way gig workers get paid has not evolved as quickly as the way they work. That may be due to the complex knot of legacy systems, regulatory requirements, and other challenges, such as cross-border employment and unbanked workers.

In the midst of this revolution, gig workers still have to wait to get paid. And they usually have few or no choices in  how  they get paid.

Crypto payments are starting to change that. And at Bakkt we're helping make that change happen.

One thing we've achieved at Bakkt is a way to give gig workers in the U.S. the option to receive a portion of their payouts in cryptocurrency. For instance, powered by a partnership with Bakkt, drivers for food delivery service BringMeThat.com will be able to select bitcoin or ether as a payout option. Another Bakkt partnership, with a financial technology leader, could lead to the integration of crypto payouts in any number of gig economy platforms for marketplace sellers and influencers.

Bakkt makes it easy for the platforms

One thing we've learned from talking with partners is that smart companies focus on their core competencies. If you run a grocery service, you don't want to hire a lot of fintech experts to figure out how to give your shoppers the option to get paid in crypto. You also don't want to wade through the regulatory and security requirements or the Know Your Customer protocols needed to start working with this new kind of money. And many companies are not ready to hold cryptocurrency themselves.

That's why companies look to us to integrate cryptocurrency into their existing payment infrastructure. Bakkt takes care of the paperwork, currency conversion, and all the other turning gears. The gig workers see a new dropdown option on their apps, offering the chance to take a portion of their pay in a cryptocurrency. But the companies still receive and pay US dollars, just like they always have.

Why would gig workers want to get paid in crypto?

I'm a longtime crypto enthusiast, but even I have to admit that that most people can't pay their rent today in bitcoin. Why would a rideshare driver, a creator, or an influencer want to receive even a percentage of their compensation in this new kind of currency?

There are several potential incentives.

To try something new: For some, this payment alternative will be an easy way to get access to crypto, which may have seemed overwhelming. They've heard about cryptocurrency in the news but registering for a cryptocurrency exchange and trading dollars for bitcoin or another currency sounds like a hassle. Selecting crypto for a portion of their pay in their gig worker app is a low effort way for them to test the crypto waters.

I'm betting that gig workers who have already tried cryptocurrency may see these options as a welcome opportunity to diversify their portfolio with one or more new currencies or skip the process of moving money from their bank to an exchange.

Faster payouts: Research has shown that most gig workers would switch to a different platform if it offered real-time payments. They also say they would work more when they need money if they could cash-out right away.¹

This makes perfect sense to me. The gig economy is set up to attract workers who want and need to earn today, not two weeks from now. Integrating cryptocurrency into payment systems is one way to enable the real-time payouts that gig workers want.

Lower fees: One type of gig worker who could avoid fees by choosing a crypto payout option is the worker who wanted cryptocurrency all along. The way things are now, this worker would receive their pay in U.S. dollars, then transfer some to a cryptocurrency exchange to buy bitcoin, ether, or their currency of choice. Along the way, they might lose part of their earnings to fees.

Another type of gig worker who could benefit from crypto payments is the global worker. Say you live in India, and you spend your days making promotional videos for U.S. companies through a freelancing site. If you are paid in dollars, you may need to pay for wire transfers and currency conversion before you can spend your pay. Accepting some or all of your pay in cryptocurrency could allow global workers to keep a lot more of what they earn.

Building a portfolio: As the soaring value of bitcoin makes headlines, more people are interested in investing in cryptocurrency, seeking either short-term profits or long-term growth. Yet, since no one knows what the value of any cryptocurrency may be in the future, investing U.S. dollars directly may feel challenging.

I think that for a lot of people, accepting a small percentage of earnings in crypto may feel like a safer way to get started with crypto investing. And keep in mind that the gig economy isn't a full-time job for everyone. It also includes people selling a few items on an online marketplace to make extra cash, for instance. So even if someone is reluctant to allocate even a fraction of their paycheck to investing in bitcoin, they might be excited by the idea of accepting crypto in exchange for selling some old records they have around the house.

Convenient payments: For others, keeping some cryptocurrency in a wallet can be an easy way to transfer value quickly. Whether it's for shopping with stores that accept crypto or paying back a friend for drinks, receiving a bit of your pay in crypto can be a way of setting that portion aside as "fun money." This might be especially true for people who are making a little extra money from a side gig or even a pastime like online gambling. I can see some people keeping their 9-to-5 earnings as dollars, but accepting their online poker winnings in ether.

In the coming months and years, I expect to see more and more gig platforms offer a crypto payout option. How workers respond to this opportunity will likely influence—and possibly expand—the cryptocurrency universe as a whole.