Financial Services for Platform Workers: Lessons from Partnerships

Platform workers in Kenya have voiced interest in a range of financial services delivered through or in collaboration with digital gig platforms. While platform operators have compelling business reasons to promote financial services for workers, most are not positioned from an operational or regulatory perspective to provide these services themselves. For this reason, some platform operators have partnered with licensed financial services providers (FSPs) to offer credit, insurance or savings. Below, we share lessons from FSP–platform partnerships based on our conversations with several platform operators and FSPs in Kenya.

Why partner?

Despite the arm's-length legal relationship between platform operators and their workers, the platform operators we spoke with recognize that they have an interest in ensuring worker well-being for a several reasons, including the following:

• To attract workers to the platform. Many platform workers must rent or take a loan to pay for the supplies needed to work in their trade. However, the associated charges can eat up most if not all of a worker’s profit margin. Platform operators have an incentive to ensure workers can affordably access capital to perform gig work without getting trapped in an unsustainable debt cycle.
   
• To retain trained workers. The costs associated with new workers mean that platform operators can benefit from cultivating a stable cadre of workers. Savings and insurance can help ill or injured workers access health care and return to work sooner than if they didn't have these benefits. Affordable access to health care also may help platform operators retain trained workers in industries where several platforms compete for labor. For example, motorbike delivery and logistics platform Sendy facilitates insurance and savings services for workers to “increase their comfort in work and life.”
   
• To help workers increase production and sales. Workers can increase production when they have access to appropriate financing options. For example, Lynk contracts with furniture makers who often have their own workshops but are limited in the type and volume of items they can produce because they lack capital.

For their part, FSPs we spoke with also had compelling business reasons to partner with platform operators including the following:

• To reach an unfamiliar client base. As one banker told us, “As banks we identify SME [small and medium enterprises], retail, and corporate – we don’t understand ‘gig economy’.” The data collected by platforms make platform workers’ income streams visible, which helps FSPs to better understand worker profiles and design suitable financial services. Compiling gender disaggregated data would help surface the unique challenges facing women and men.
   
• To operationalize financial services with an unfamiliar client base. Platform operators use communication and payment mechanisms to reach platform workers. Providers also can use these mechanisms as the rails to provide their services. This helps them to avoid significant cost for FSPs that do not have infrastructure designed to reach this segment.

How (not) to partner

Given all these reasons, it was not surprising to hear that several of the platform operators and FSPs we spoke with had attempted partnerships in the past. Like other partnerships in the DFS space, many seemed to have been plagued with issues. These issues fell into the following three broad categories:

• Lack of explicit and aligned expectations. In some cases, FSPs had higher expectations for data quality and completeness than platform operators could deliver given the informal nature of their workers, suppliers or end customers. Platform operators had much better cash flow data for platform workers than the providers had previously been able to access, but platform staff or vendors often were needed to provide additional quality control. This significantly eroded the value proposition of the partnership for FSPs. At the same time, at least one platform operator complained about the customer service its workers received from its FSP partner. Other partnerships fell apart because of misunderstandings about partnership exclusivity and data ownership.
   
• Poor customer experience. In discussing why its initial attempt to extend credit to workers failed, one platform operator pointed to the fact that its FSP partner required borrowers to switch out of the platform’s app and into a USSD interface to access the loan. This feature has since been redesigned to be fully in-app and to offer vendors a “marketplace” of credit providers. This is an example of how open APIs could enable platform workers to access more financial service options. FSPs also reported that partnerships had failed because platform operators had been unable or unwilling to adequately integrate the product offer into the worker and vendor interface. Platform worker consent also would need to be clearly and effectively built into the process.
   
• Unmanageable loan repayments. Several lenders told us that in any future partnerships with platform operators, they would require establishing the means of repayment upfront – preferably deducting it from platform income automatically. In one small pilot between a lender and a ride-hailing company, drivers were offered the option to manually calibrate payments to their platform income or pay on a fixed schedule. All chose the latter because the former was too complicated. At the time of our interview, all were behind on their loans because planning for fixed repayments from irregular income proved too complicated. The ride-hailing service operator also told us that another loan program underperformed because many drivers had never had such a large-scale loan and planning repayment proved difficult. At least one platform, Lynk, has acted on these lessons. It now offers its tradespeople starter loans with repayments conditioned on income earned from the platform. Failure to do so can not only be disastrous for the platform operator and FSP, but also for platform workers.

Collectively, platform operators and FSPs in Kenya have accumulated significant experience in fine-tuning partnerships to offer financial services to platform workers. This is especially the case with insurance, with Uber, Sendy and Lynk all facilitating coverage for workers. However, platform operators and FSPs both have valid business reasons to apply lessons from past partnerships to a broader range of financial services. Our conversations with platform workers in Nairobi indicated worker demand for not only insurance but also credit and, especially, savings solutions. It is our hope that the sector can leverage these lessons to offer more high-quality financial services to platform workers in the future.