Embedded finance
Embedded finance
Financial inclusion
Financial inclusion

Why payment and e-commerce providers need to prioritise serving the side hustle market

The rise of 'side hustles' is an umissable opportunity for payment service providers (PSPs) and e-commerce platforms if they leverage embedded finance.

The side hustle is on the rise. This is the result of a variety of factors – more time during the recent COVID-19-induced lockdowns, an explosion in social-media powered e-commerce, as well as the rise of pop-up markets in urban centres. In fact, according to recent YouLend research, as many as 16% of current businesses are a side hustle.

For payment service providers (PSPs) and e-commerce platforms, this opens a swathe of opportunities. Small businesses are side-stepping banks for funding, and e-commerce platforms and PSPs are ideally positioned to be their primary sources of financing. This presents these providers with a unique opportunity to cement their position as the business owner’s primary partner. It also means that moving too slowly could cost them a crucial advantage – once locked in with a provider, these side hustlers are hard to woo away.

E-commerce needs fast financing

Side hustles are as varied as those who own them, but there is a common thread that ties them together: their agility. They have a much closer, more personal relationship with their customers and niche market, and their success depends on being able to react quickly to their customers’ needs.

The problem is that, often, side hustles are small businesses that began as a hobby. They rarely have access to the capital flows required for this level of agility. As such, they need financial support to capitalise on growth opportunities at speed.

In light of this, e-commerce platforms and PSPs have to provide fast, flexible and affordable funding options in order to ensure customer loyalty and growth – factors at the very heart of business growth.

Cash is no longer king

Over the last decade, the retail industry has undergone a radical transformation. Even before COVID-19, the shift to e-commerce was well underway, forcing businesses to adapt to how their consumers prefer to shop.

But in the face of global lockdowns, consumers shifted to online shopping at record levels – and even in-store, the preference for contactless payments skyrocketed. And this trend is only set to continue: our data reveals that 44% of cash-only businesses plan to add other payment methods in the next five years, and 45% of non-card businesses would reconsider their payment options if they had access to faster speeds than those currently available.

It is clear that more and more businesses are going cashless. And the benefits are multi-fold: allowing businesses to meet this shifting consumer demand, yes, but also higher speed, increased transaction value, reduced risk of on-premises theft, and an improvement in cash flow. In fact, according to YouLend data, over half of businesses consider consumer preference and cash flow as the primary motivators for going cashless.

Only by understanding the true extent of the benefits and scale of this opportunity will PSPs and e-commerce platforms be able to fully capitalise on it.

A digital first approach

Side-hustlers in 2022 are, at their very core, digital entrepreneurs. As well as running their side business, they are also working their primary 9-to-5 jobs, taking care of their families, and keeping up with all the other demands of everyday life. This means that, for these busy entrepreneurs, their side business is often run from their phone or tablet.

This is where e-commerce platforms and PSPs can really add value. They can create crucial differentiation (and therefore loyalty) by enabling a low-maintenance financing process – no multi-form, clunky application process, endless phone calls, or unnecessary paperwork. For the side-hustle entrepreneur, being only a few clicks away from a financing proposal is valuable; receiving cash in their bank account only 24h after applying – a game-changer.

The coming year is rife with openings for growth and differentiation for payment and e-commerce providers. It only remains to be seen how they will play to these trends, and ride them to either consolidate their positions or challenge existing incumbents.

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