A new surge of financial products is being created to speed up payment to gig economy workers. But with the potential for fraud drastically heightened due to the COVID-19 pandemic, fintech executive Monica Eaton-Cardone urges the payments industry to develop and maintain safeguards as the employer/employee relationship evolves and strives to overcome unchartered challenges.
(TAMPA BAY, FL) APRIL 06, 2020 – Approximately 57 million U.S. workers—a third of the country’s total workforce¬—are employed in what’s known as the “gig economy” as independent contractors rather than traditional W-2 employees, according to studies by Small Business Labs and Gallup.(1) Monica Eaton-Cardone, an entrepreneur and global fintech executive specializing in risk management and fraud prevention, says that fintech companies are rapidly developing “instant access” payment solutions tailored to these workers and the companies that employ them.(2) Considering the waves of uncertainty and panic that COVID-19 continues to flood the economy with, she cautions the payments industry to maintain awareness of security and contract performance issues as they traverse this new labor landscape. Within the payment industry, some are also voicing concerns about the impact that Assembly Bill 5 will have on gig workers.
Assembly Bill 5 Builds Doubt for Instant Issuance
One source of ambiguity for the gig economy is California’s Assembly Bill 5, which went into effect on January 1st of this year. AB 5 requires many businesses to reclassify their gig workers as employees to be entitled to paid health coverage, pension contributions, overtime, and other benefits (though the specifics regarding which employers and industries will be required to comply with AB 5 is still being determined in court.
Eaton-Cardone notes that there is no conflict between the ability to make instant payments and AB 5’s core assertion (being that the burden of proof for classifying individuals as employees or contractors is the employers’ responsibility). For example, one payment facilitator company known as Galileo has already rolled out its “Instant Issuing” program, which enables business to make payroll for both gig workers and traditional 1099 employees.(3) “Regardless of a worker’s status as employee or contractor,” Eaton-Cardone says, “businesses can still provide real-time pay.”
Assembly Bill 5 Amidst COVID-19
AB 5’s implementation comes during an interesting time for not only gig workers, but employees all over the country—as the COVID-19 crisis has abruptly and indefinitely upended the economy. Officially signed into law on March 27, a $2-trillion law known as the CARES (Coronavirus Aid, Relief, and Economic Security) Act features a new protocol called “Pandemic Unemployment Assistance”, which extends unemployment benefits to gig workers, self-employed individuals, and independent contractors—all of whom were previously ineligible.(4)
This has presented gig economy companies an entirely new set of challenges. For example, at the end of last month, ridesharing companies Lyft and Uber faced backlash when two drivers requested federal judges to interfere in enforcing AB 5, with the attorney representing both drivers claiming these companies are failing to provide for their employees amidst COVID-19, according to Wired.(5) In response to this, the article cited a statement made by Lyft spokesperson Adrian Durbin, who said that the drivers’ lawyers are “improperly trying to use this crisis” to obtain benefits that courts had otherwise denied in the past. He continued to say that pushing the company to change its business model in the wake of a pandemic would leave drivers out of work.
During the Top Summit COVID-19 Quarantined Press Conference on Tuesday, March 31st , Eaton-Cardone discussed several challenges companies are tackling as COVID-19 rages on, including rises in fraud, chargebacks, and other financial uncertainties. While such issues pose obvious threats, Eaton-Cardone noted she does see this as an opportunity for businesses to change.
“Some good news is that I think a lot of merchants will be inspired to confront these challenges, pivot, and innovate out of them. I mean, this is how most companies got started: they found a problem and they solved it. And we all know there are plenty of problems right now,” she said, “but there are also a lot of opportunities to solve them.”
While many states are still awaiting further guidance before making CARES Act’s benefits available to gig workers, California’s Employment Development Department is a prime example of such innovation. Department spokesperson Loree Levy recently stated that the office is revving up its processing abilities, to include “adjusting eligibility to address this unique situation”.(5) With that office alone seeing a staggering 363% increase in processed unemployment insurance claims during the last week in March, developing and enacting plans is now more crucial than ever.
Future Opportunities for Instant Issuance
Eventually, Eaton-Cardone says legislation will catch up with the ongoing transformation for the instant access payment solutions’ market. In the meantime, the ‘instantness’ of these new payment platforms creates potential opportunities for abuse and outright fraud, especially considering the tremendous chaos brought on by the coronavirus.
“That leaves the burden for policing the market with sites like Upwork and Freelancer, who may embrace stricter know-your-customer privileges for the contractors who seek work through their platforms,” Eaton-Cardone says. “They may even opt to guarantee conditions between contractors and those who hire them to protect their own reputations—if they don’t already do this.”
While speaking primarily on the issue of increased chargebacks in relation to the current pandemic, during the recent press conference Eaton-Cardone stressed the importance of companies working to maintain a balance between consumer relations while keeping the business afloat during such dire times.
“Many business owners—myself included—are used to the policy of putting others first,” she says. “This is the time when businesses need to put their own survival first. And sometimes that means confronting difficult decisions and maybe even looking at ways that they could utilize other companies to help them get through it. One thing that I think that this whole pandemic has done is exposed the wonderful nature about being humans. We all have a connectivity, and at the end of the day, we’re really interested in surviving as a whole.”
About Monica Eaton-Cardone:
As an acclaimed entrepreneur, speaker, and author, Monica Eaton-Cardone is widely recognized as a thought leader in the FinTech industry and a champion of women in technology. She established her entrepreneurial credentials upon selling her first business at the age of 19. When a subsequent eCommerce venture was plagued by revenue-leeching chargebacks and fraud, Eaton-Cardone rose to the challenge by developing a robust solution that combined human insight and Agile technology. Today, her innovations are used by thousands of companies worldwide, cementing her reputation as one of the payment industry’s foremost experts in risk management, chargeback mitigation, and fraud prevention. As CIO of Global Risk Technologies and COO of Chargebacks911, Eaton-Cardone leverages her global platform to educate merchants on best practices in fraud prevention and to spotlight the competitive and economic advantages women can bring to the technology workforce. Her nonprofit organization, Get Paid for Grades, invests in students to inspire a new generation of innovators. For more about Monica Eaton-Cardone, visit http://www.monicaec.com.
1. Mitic, J., “Gig Economy Statistics: The New Normal in the Workplace,” Fortunly, August 21, 2019, fortunly.com/statistics/gig-economy-statistics#gref.
2. “Mastercard Launches Accelerate to Supercharge Fintech Success,” Mastercard press release, October 28, 2019, mastercard.com/press-releases/mastercard-launches-accelerate-to-supercharge-fintech-success/
3. “Galileo Launches Galileo Instant Issuing, Empowering Businesses to Quickly Issue Debit Cards,” Galileo press release, November 21, 2019, mobilepaymentstoday.com/news/galileo-mastercard-launch-program-to-rapidly-issue-debit-cards-to-companies/
4. Iacurci, Greg. “Unemployment Benefits for Gig and Self-Employed Workers Stalled by Confusion, Delays.” CNBC, CNBC, 2 Apr. 2020, cnbc.com/2020/04/01/unemployment-for-gig-self-employed-workers-mired-in-confusion-delays.html.
5. Marshall, Aarian. “The Covid-19 Pandemic Aggravates Disputes Around Gig Work.” Wired, Conde Nast, 30 Mar. 2020, wired.com/story/covid-19-pandemic-aggravates-disputes-gig-work/.
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