‘Like navigating a dark forest with a dying mini-flashlight’: How Lance uses automation to simplify money management for freelancers

Although the pandemic slowed economic growth worldwide and caused millions of layoffs in the US alone, it simultaneously created room for the rapid growth of certain sectors of the economy. Since the beginning of last year, the US freelance industry has experienced a 700% increase in transaction volume, according to a report from Upwork.

Nearly 60 million Americans are now freelancers, making up more than one in every three workers. These self-employed individuals have unique banking requirements, as they have to manage their (often volatile) income, taxes, savings, and other financial obligations on their own, in addition to running their business.

Although traditional financial institutions have been slow to respond to the growing demands of freelancers, a number of challenger banks and fintechs have stepped in recently to offer personalized services tailored to their needs. Examples include Lili, Oxygen, Novo, Stoovo, and indi.

Lance is an NYC-based challenger bank that similarly caters to the financial needs of the freelance economy. However, it tries to stand out from the pack by using automation to help independent workers allocate payments towards their most important goals.

Lance was built by a team of ex-freelancers, who say they know firsthand how hard it is for self-employed people to manage their finances. They say the experience is “like navigating a dark forest with a dying mini-flashlight”.

In order to simplify money management for freelancers, Lance offers an FDIC-insured bank account that automatically divides their earnings into sub-accounts for salary, savings, taxes, business expenses, and more. Customers can allocate funds to these sub-accounts according to custom preset levels. To do this, they share work-related information along with basic tax data, so the Lance system can make recommendations and allocate each payment in the most efficient way.

“There are a number of banking solutions in the market that freelancers can choose from today, but Lance is the only platform to give independent workers an automated game plan that distributes payments toward critical needs, like savings, taxes, and business expenses,” said Oona Rokyta, co-founder and CEO of Lance. “Other platforms require freelancers to manually allocate funds for various purposes. At Lance, this happens behind the scenes.”

Lance’s target demographic is what Rokyta refers to as the “middle class of freelancers” – those who make between $50,000 and $125,000 a year. She says this group faces the most challenges when it comes to their banking needs. Lance claims its automated banking and accounting functions save these freelancers an estimated 100 hours and $7,500 in fees and deductibles every year.

“The average freelancer today is spending somewhere between $50-150 monthly on various invoicing, bookkeeping and other business-related software, and they’re still missing about 10% of their annual income in missed tax-deductible business expenses,” said Rokyta. “By tracking all their business income and spending, we capture all the tax-deductible expenses, replace the other software expenses, and save them the time spent organizing everything on a regular basis.”

Lance recently launched a new feature, Lance Checkout, which allows freelancers to directly receive credit card payments from their clients from within the Lance business banking account. To do so, freelancers can create a payment request online and share a one-time link with their client. The client then makes a credit card payment on that link, and the money goes directly into the freelancer's bank account. In addition to credit card payments, freelancers can also route payments from Venmo, Cash App and PayPal to their bank account. 

Lance Checkout is available for members of the Lance Pro account, which costs $12 a month. Pro account holders can also choose to have their tax withholdings sent to the IRS every quarter.

The ability to directly receive credit card payments without setting up a separate merchant account is a major benefit for freelancers, according to Andrew Latham, a certified personal finance counselor and the managing editor of SuperMoney.

“Having the option to get paid by credit card gives several advantages to freelancers. It makes it easier for them to get customers who are struggling with cash flow to pay up,” said Latham. “Freelancers can also enforce cancellation deadlines by charging their client's credit card as soon as their account hits the deadline.”

Lance is certainly not the first fintech to allow freelancers to get paid by credit card. PayPal, Stripe, Payoneer, 2Checkout, and several other platforms provide this option. However, Latham says Lance is the first bank account designed specifically for freelancers that combines direct credit card payments with other smart banking features, such as automated budgeting and tax withholding.

Recently, Lance also teamed up with Abound, a firm that builds financial APIs for the independent economy, to launch a collaborative organization called the Independent Economy Council. The initiative will pool together CEOs, freelancer organizations, and academics in the space to gather industry data, push inclusive legislation, and provide better resources for freelancers and other independent workers. The IEC already has a number of companies signed up, including Gig Wage, McKinsey & Company, Wethos, and Freelancers Union.