The self-employed and freelance workforce is only expected to grow in significance, which could challenge traditional banks and credit unions that aren’t yet equipped to meet this segment’s needs. The neobank Oxygen was created to address gig workers’ financial issues and has seen rapid growth. Top execs explain what makes the mobile brand tick.
With the pandemic receding from front-page news, more people are returning to the office. But not all of them.
There are roughly 59 to 68 million people who the world refers to as “gig workers” still in the workspace. Small Business Labs and Gallup estimate that almost a third (29%) of these workers have made an alternative work arrangement their primary job. And of that group, 23% do this full-time and nearly half (49%) are part-time.
MBO Partners, a job-sourcing platform, predicts that over half of all U.S. workers will be independent by 2025. It’s a population that traditional banking is largely overlooking.
As noted in an earlier article, the majority (51%) of independent workers don’t have a separate account for their business income and instead funnel their self-employed income into personal accounts, according to a 2021 report by Abound. Of those who pool their funds into a single account, almost half (46%) say they would like to open a new, separate business account in the next year — which the software company estimates to be 16 million of the 68 million independent workers in the industry today.
Many digital banks have nudged their foot through the open gap in the gig doorway, but one in particular, Oxygen, has notable success in getting banking services to this underserved segment. The neobank launched its initial products in 2019 and has amassed some 600,000 customers and attracted $500 million in capital.
The big idea behind the digital bank is that it is offering personal and business accounts to freelancers, who Oxygen’s team have found are typically underserved in banking.
“The U.S. gig economy is booming, and in the current environment we will only see that increase. Unfortunately, some traditional institutions aren’t adapting,” says CEO and founder Hussein Ahmed. “That’s leaving the newest generation of workers and those who are self-employed short on options.”
Keep An Eye Out:
Covid-19 might be losing its influence on the U.S. workforce — but that doesn’t mean everyone is returning to traditional jobs.
The Financial Brand spoke with Oxygen’s Senior Vice President and Head of Business Development and Strategic Partnerships Ryan Conway, who explains why the gig workforce will continue to grow in 2022 and beyond.
“Layoffs at the outset of the pandemic absolutely led to our early growth in 2020,” Conway explains. “What we’ve seen since then, largely driven by a quick recovery from the pandemic economic crash, is more people are choosing to work for themselves.”
Conway believes this subset of consumers — who were initially driven toward the gig economy following ‘the Great Resignation’ — isn’t going anywhere, even as Covid-19’s chokehold on the workforce eases up. “These are the people we are building for, and I think they are here to stay.”
What Got Oxygen Started
Oxygen is one of the first U.S. neobanks which, at launch, offered both consumer and small business accounts.
Like many good ideas, Oxygen resulted from a “pain point.” Ahmed capitalized on an issue that he himself ran into when he was a freelance startup consultant.
“That’s when I stumbled upon the market segment we are serving today,” Ahmed said in a podcast last year. He was working from a WeWork space and realized that “everyone around me, from photographers to real estate brokers to accountants, were facing the same problem” — the difficulty of handling the mix of personal and business finances.
Meeting the Needs of Customers: Self-employed individuals are looking for a mix of personal and business accounts that work together.Conway explains the need by alluding to a quote from Jay-Z who said, “I’m not a businessman. I’m a business, man.”
“That is how a lot of our customers think,” Conway says. “They don’t distinguish between business and personal. To them, they are the business. There’s no 9-5 here.” Oxygen was created to provide some balance and order for people juggling business and personal accounts.
Before launching Oxygen, Ahmed jumpstarted Transpose Technologies, a software company designed to help businesses manage their backend projects and data with a single platform. He also has had technology experience at Amazon, Virginia Tech and Microsoft.
Conway joined Ahmed in August 2019 after extensive work in the payments sector, with a portfolio of jobs at Mastercard, Worldpay, BlueSnap and others.
What Sets Oxygen Apart from Banks and Other Fintechs
The digital bank puts popular features into the hands of gig workers, such as cashback on debit card purchases, which for small businesses, can be significant. What differentiates Oxygen, however, is its suite of services — some of them unusual — that it offers specifically to its business populations.
For instance, small business and entrepreneur customers can create an LLC and model their cashflow right in the Oxygen mobile app, according to Medium.
Yet, if anything makes the digital bank stand out, it is its unconventional rewards program — called Oxygen Elements — which offers four different levels of rewards for cardholders.
In a partnership with CompoSecure, a premium credit and debit card manufacturer, Oxygen’s rewards program goes head to head with those of card giants like American Express and Chase.
Oxygen Earth — ‘Your Space to Build’ The first and most basic tier is Oxygen Earth, which carries the tagline “Your Space to Build.” It advertises no fees or qualifications to apply. Customers can receive 2% cashback on all purchases and a $1 cashback on food and coffee as well as 0.50% APY on an Oxygen Earth savings account. Customers can also set aside three savings goals that they can chip money into.
Other basic services (which are also included in the other three tiers) include:
- Cell phone protection
- Extended warranty protection
- Auto rental collision damage waiver
- Baggage delay protection
- Lost luggage protection
- Hotel theft protection
- Three active virtual cards
- 2-day early direct deposit
- Access to a fee-free ATM network
- Bill pay
- Send money to friends