The recent UpWork study, Freelancing in America 2017, refreshed data about many aspects of the Gig Economy including participants, motivations and demographics. The study reinforced the concerns that independent workers have about the future, like the availability of health insurance, especially given the threats to the Affordable Care Act (ACA). Similarly, continued business development is always an issue for freelancers. But chief among the concerns this growing economic cohort has is income predictability. According to the study, 63% of independent workers need to dip into their savings during any given month, while only 20% of those employed in traditional ways have that need.
Advisors to the freelance world advocate solving this variable income problem through better savings habits. But that is easier said than done. Independent workers with financial expertise may be able to devise elaborate budgeting systems, but for most it is not a natural activity. Apps have been developed to help freelancers budget, like Mint and Level Up. They are free and provide interfaces to accounts to enable alerts when balances get low. As such, these tools can provide more data on your financial position, but they don’t address the root issue of income predictability — a variable cashflow. Enter Trezeo.
The founders, Garrett Cassidy and Flavien Charlon, are fintech veterans; Cassidy worked for Goldman Sachs, and Bank of Ireland and ran the first fintech accelerator at the NDRC (National Digital Research Center) , Ireland’s initiative to support digital entrepreneurship. Charlon is a Microsoft alum and also founded pioneering blockchain technology company, Coinprism. He is also the author of the Blockchain Open Assets protocol, used by Nasdaq. The pair began looking at digital banking and noted there was no product targeted to small businesses like the freelance community. As they dug deeper into the potential opportunity, they saw that the biggest issue for so many freelancers wasn’t their banking relationship but the peaks and valleys of their cash flows. They started testing the idea of developing a product that would smooth these peaks and valleys and allow greater income predictability, and the result was Trezeo.
Headquartered in Dublin, but operating in London as well, Trezeo is a start up fintech company that is beta testing a product to solve the income volatility issue by developing a user-friendly platform that enables a dependable income stream for freelancers. By creating a structure that automatically saves excess income, the platform provides freelancers a cushion when the income pendulum swings to the low side and cash flow is tight.
Here is how it works in very simplified terms. Trezeo acts as a middleman: collecting irregular payments, and paying out a smoothed income stream to the freelancers bank account. To achieve this, a freelancer signs up with Trezeo and creates an account. Trezeo is not a bank, it makes its money through subscription fees. It uses sophisticated algorithms to look at a subscribers’ deposit history to understand the nature of their income stream. Looking at that data, it works with the subscriber to establish their achievable self-employed income level. The subscriber then recieves payments from customers into their new Trezeo account and funds in excess of the target are held in their Trezeo account. In months where income is lower than the target, prior overages can be diverted to get to the right income level. If the overages aren’t sufficient, Trezeo provides the cash to make the freelancers whole for the month. Providing this cash is covered by the subscription fee , rather than at an interest rate, making this overdraft protection much more cost-effective and predictable than the traditional way of getting extra cash, a payday loan
Cassidy sees the potential for product extensions as well, like special purpose savings programs that would enable freelancers to save for a major purchase, holiday or future security deposit, tailored insurance, investments and pensions. Similarly, the ideas of income advances may be viable line extension.
The pilot is designed to provide more data to understand the volatility inherent in this market place. They aim to have 500 members in the pilot which will expand as the firm receives the appropriate licenses for operations. The pilot is initially targeted to workers in the driving and delivery space since those workers appear very interested in the service. Even better, Cassidy maintains, is that they talk to each other a lot, so the feedback they will offer the firm in this critical test will be valuable as the Trezeo team refine the product offering. Trezeo has also received positive feedback from platforms and operators in this sector and aims to partner with these platforms and operators to bring the service to their workers.
There is certainly risk involved in any type of product that will advance funds, but the large scale marketplace and sophisticated risk algorithms should reduce that risk. It is that large scale market opportunity that has earned Trezeo several awards in the last quarter. Trezeo recently won the Payments Dragons’ Den competition at PayExpo Europe in London. In late October, it won the top price at the NRDC start-up competition, beating 11 other technology companies, and securing not only additional funding, but support from this important venture fund.
“Trezeo has an outstanding solution and stood out to all of the judges as having serious potential for growth in international markets,” said Ben Hurley, CEO of NDRC. I agree with Ben, and the US is certainly an international market that would be interested.
If you like the sound of this then you can get involved in the conversation about self-employed finances by joining Trezeo’s Facebook group – https://www.facebook.com/groups/trezeo. The more voices the better,