The gig economy has become an appealing option for American workers seeking flexible self-employment, but delayed payouts can quickly drive these workers into financial hardship, especially if the delays become a regular occurrence. In this month’s “Expanding Payments Choice Playbook,” PYMNTS talked with Grubhub’s Mrugesh Bavda about how the food aggregator’s instant payments program improves its drivers’ financial freedom and loyalty.
Gig work has become a practical option for many Americans in the past several years, and millions of individuals have joined the gig economy to offer rideshares, deliver food, host guests on their properties or perform a multitude of services. Experts estimate that there were at least 59 million gig workers in the United States in 2020, representing approximately 36% of the entire workforce.
The life of a gig worker can be challenging, however, especially when it comes to financial stability. A 2021 survey found that just 15% of these workers had enough savings to handle an emergency expense and that 29% had taken out a payday loan to make ends meet in the previous 12 months. Instant payouts can go a long way toward alleviating these challenges, and that is why delivery service Grubhub introduced them back in 2018.
“We offer something called Instant Cash Out,” Mrugesh Bavda, product manager at Grubhub, told PYMNTS in an interview. “This feature utilizes something called the Real-Time Payments (RTP) network, built by The Clearing House, which offers immediate funds to our couriers so that they [can receive them] within minutes.”
Bavda provided an inside look at why demand for instant payments among Grubhub’s couriers is rising and how the company leverages Instant Cash Out to meet that demand.
Why Drivers Are Demanding Instant Payments
Gig workers have always desired instant payments, but the pandemic made their interest particularly acute. The food delivery industry surged as social distancing and stay-at-home practices took root, and drivers sought a better payment option to help them through the difficult economic climate. These conditions led to a massive upswing in the number of couriers using Grubhub’s Instant Cash Out system.
“While many industries slowed down during the pandemic, the food delivery industry skyrocketed in demand,” said Bavda. “Our drivers have told us that one of the most appealing aspects of gig work is the liquidity of money, and drivers expect that we offer a cutting-edge payment solution.”
Financial planning can be particularly tough for gig workers, as their pay can vary greatly from one pay period to the next, making it difficult to budget accurately. Instant payouts allow these workers to know exactly how much money they have to work with, enabling better financial management.
“Instant payments get [workers] their funds immediately to manage both everyday and unexpected expenses,” said Bavda. “They don’t have to wait for the pay period to end in order to get their funds.”
Different options for enabling instant payments exist, but Grubhub decided to partner with Chase Bank to use The Clearing House’s RTP network.
Instant Cash Out
Grubhub explored a variety of different methods before landing on the RTP network. Bavda explained that the company already had most of its drivers’ bank account information for direct deposit. Many banks have joined the RTP network, making this instant payout option a natural fit for Grubhub’s existing business model.
“When we knew that this was a very highly sought-after feature by our couriers, we decided to see what our options were,” he said. “One of the things we realized [was] that we already collect their bank account information, so in order to make it very easy and seamless for them, we should utilize a partner like Chase to go after the RTP network.”
The use of the RTP network is spreading quickly among banks, allowing other gig companies to implement instant payroll for their workers as well. Gig work can be stressful, especially if the workers’ finances are already unstable, and offering instant payouts can help facilitate gig workers’ greater financial freedom.
“We’re working with Chase to make sure more banks are using [the RTP network], and it’s been a huge topic for all these banks,” said Bavda. “Chase is pushing, and we’re pushing too, to utilize [the RTP network] so more and more couriers are able to have instant funds versus just waiting for weekly [paydays].”
Real-time payroll is expanding to offer more timely payouts for workers in a huge range of industries. As the pandemic continues, any move toward providing gig workers with financial security will help create greater prosperity for the economy as a whole.