In the wake of the Covid-19 pandemic, the world of remote work is booming. Both the gig economy and work-from-home (WFH) initiatives are becoming increasingly popular. Global lockdown measures have introduced countless companies, around the globe, to the transformative qualities of out-of-office work. Although remote work has been limited by the drawbacks of cross-border payments, modern fintech can create borderless solutions, to ensure that talent can be enlisted from anywhere on demand.
Fintech has the power to solve problems for both businesses and their remote employees. For instance, according to a survey by Mastercard, two-thirds of gig workers in the US have reported needing faster access to their wages - with 85% claiming that they would work more if they could expect to be paid at a faster rate. These limitations have become further exposed by the pandemic - in which a growing number of gig economy workers invariably felt the financial hit of global lockdown measures.
(Image: Statista)
As the data above shows, the Covid-19 pandemic has seen 44% of employees in the US embrace remote work, as opposed to the 17% prior to the health crisis. The significant growth of the remote work trend shows that industries must adapt quickly to better accommodate this new pattern.
This can be a significant challenge for traditional finance, where employees are generally expected to be in-house and certainly not based overseas. However, emerging technology can help to better support remote work and leverage a more frictionless transformation into a more remote future.
The Hurdles Facing Borderless Finance
The act of sending an international payment through traditional banking channels can be a complex and drawn-out process that requires the involvement of many middlemen along the way.
For instance, if a transaction between a company in the United States and India were required, the US business would ask its bank to send a payment overseas. The domestic bank would then confer with another correspondent bank to leverage the transaction, and a respondent bank in India would ultimately receive the funds before transferring them to the recipient company’s account. Each step of this process takes time and costs money to carry out, which can lead to a significant buildup of fees. According to World Bank data, the average fee for sending payments worldwide is around 7% - which can cost companies relative fortunes when larger transactions are required.
Blockchain-based solutions can streamline the process by storing each transaction on a secure distributed ledger. Once a transaction is brokered, it’s stored in an immutable manner and the party has immediate access to the payment without the need for middlemen or hurdling red tape. Significantly, the lack of intermediaries also means that fees are cut, too.
Furthermore, because of the distributed nature of blockchain technology, it’s impossible for records to be tampered with once a payment has been recorded. There’s no way for the transaction to be reversed or changed within the ledger - meaning that there’s a far greater level of accountability and security for all parties involved.
For businesses that are not yet ready to plunge into blockchain technology, but still feel the urge to optimize their financial flows and break up with traditional banking, APIs (authorized payment institutions) may be the best choice by far. With most of them offering payment card acquiring, a number will also assist with quick account opening for businesses, enabling you to keep most of the processes under one roof.
While the traditional banks and the leviathans of the acquiring industry may not be very responsive to the needs of emerging eCommerce businesses, it may be worth considering medium segment players like Unlimint or Connectum, which demonstrate flexible pricing policies and adjusted solutions for securing payments.
Gig Economies Built on Borderless Payments
The transition towards remote work will invariably lead to growing numbers of international hires and is likely to boost the capacity for businesses to enter foreign talent markets. However, the success of this evolution will revolve around the capacity for emerging fintech to accommodate more borderless payment systems.
Today, it’s possible for companies to use blockchain-based apps and payment platforms like LBank as a means of distributing salaries overseas to employees based in nations with different fiat currencies - all with lower fees in place and faster transaction times.
Another example of distributed ledger technology that’s already being adopted across many fintech companies is Hedera Hashgraph. With the ability to process as many as 500,000 transactions per second, the Hedera Hashgraph leaves Visa’s average transaction processing rate of 25,000 per second in its wake.
Companies looking to embrace remote work will also need to consider adopting salary packages based on the geographic location of their employees. This can help companies and employees alike to receive wages that are in line with the living costs of the location in which they’re based. As far as APIs like Connectum are concerned, they are more flexible in terms of providing tailor-made fees for your geographically dispersed payouts than traditional banks are.
Blockchain technology can also aid these variations through the use of ‘smart contracts, which can enable employers to define a more dynamic set of rules surrounding remote work. These smart contracts, which are written into the chain, feature well-defined conditions by the parties who created the contract. For instance, the contract could state that specific payments are sent automatically to employees whose VPN access comes from a Mexican server, an Indian server, or a US server.
Fundamentally, the acceleration of remote work is set to be an exciting time for both employees and businesses alike. Although there are plenty of hurdles to overcome in creating a frictionless environment for work from home staff and freelancers, the growth of fintech and blockchain technology ensures that the future looks bright for this liberating facet of the age of the new normal.