Finance is a core aspect of any business. It’s also a frequent target when it comes to digital disruptors. There’s a reason blockchain has been a key component of so many fintech use cases that involve providing liquidity for businesses.
Earlier this year, Spera conducted more than 400 interviews across four continents with independent workers and the businesses that employ them. Time and time again, one key issue came up: It can be difficult to get paid on time, in full, and from a distance.
The problem stems from hiccups on the transactional side, including fiat conversion, changing cross-border fees, and client-worker communication issues. Blockchain proposes an interesting solution by effectively decentralizing processes to reduce bottlenecks across transactions.
Payment Problems Aplenty
The modern workplace includes a ridiculous number of freelancers and third-party service providers. Despite this prevalence, a survey by the Freelancers Union shows that 50 percent of freelancers have trouble getting paid for their work. Delayed payments are the main issue, though one-third of respondents said they had experienced situations in which they were not compensated at all for their work.
Ongoing payment issues create marketplaces devoid of freelancers, with talent moving away from platforms that have an unbalanced scale of power. Making matters worse, some companies take advantage of independent freelancers and delay processing payments to gain control of their cash flows. This places a tremendous burden on freelancers, and it eventually led the California Supreme Court to rule that gig economy companies cannot count workers as independent contractors — these companies must now pay workers a minimum wage.
While there is plenty of blame for the companies, sometimes the clunky methods of paying freelancers create compensation issues. This goes back to differences in the mode of financial payments between freelancers and companies, which can result in cash flow delays. In our current system, freelancers end up sacrificing a lot to ensure they get paid.
Breaking Bad Habits With Blockchain
These issues might seem overwhelming, but one solution is garnering quite a bit of attention: onboarding freelancers on a blockchain platform powered by cryptocurrencies. Cryptocurrencies are flexible and not bound by any intermediary. They are simple to use, as each payment can be sent like a text message.
Blockchain technology maximizes the efficiency of cryptocurrency by routing the power to authenticate transactions through a network of nodes and participants. By bypassing banks, blockchain is able to eliminate time delays and transactional errors. Beyond expediting transactions, cross-border payments have the potential to help companies by lowering processing and upkeep costs — easily amounting to billions of dollars annually in savings.
In addition to better (and faster) payments, cryptocurrency is also much more secure. Identity verification is done through consensus and community trust, which makes identity theft technically impossible. All information is stored and encrypted in the blockchain in an unalterable format, which allows blockchain to avoid chargebacks (one form of fraud) altogether.
Tax reporting also becomes less complicated, as blockchain allows for transparency across transactions. This removes the bottleneck of processing delays, making disputes less likely to happen as information is verified every step of the way.
Cryptocurrencies and blockchain show a lot of promise, and they are likely to improve with time. As software evolves to meet our changing demands, blockchain payments will present an intriguing option for the freelance marketplace.
The single-income way of life is on borrowed time. Freelancing and other forms of creating value through services will undoubtedly have a bigger role in shaping industries. Time will tell, but blockchain could be an integral part of changing the game across industries in terms of transparency, visibility, and the way we form mutually beneficial relationships.
Companies and workers are only beginning to experiment with using various technologies to exchange goods and services directly, which has liberated both parties from the shackles of intermediaries like banks. Whether it’s blockchain or another form of payment that has yet to come to fruition, the payment problems of today should become a distant memory.