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‘We’re building a new category’: Banking solutions for freelancers could become a hit

  • The rise in freelance careers is continuing this year.
  • Challenger bank Lili wants to carve out a niche that is part business, part consumer.
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‘We’re building a new category’: Banking solutions for freelancers could become a hit

With Covid erasing job openings and stretching unemployment numbers, 2020 saw an uptick in freelancers and gig grabbers. In 2021, this trend is continuing, with ‘self-employed’ taking up more space in CVs, and freelancers getting more spots among hirees. 

In late 2020, 90% of companies surveyed said they see a future advantage in shifting their talent model to containing a blend of both full-time and freelance employees, according to research by Harvard Business School and BCG’s Henderson Institute. 

Talent platforms are getting more traction as well. Fiverr’s Q1 revenue this year was $68.3 million -- a 100% year over year growth. Its competitor Upwork also saw an increase. Its revenue for Q1 was $114 million -- a rise of 41% compared to the same quarter last year.

Aiming to capitalize on this budding segment is Lili, a challenger bank for freelancers. Having launched in January 2020, the company is still pretty young. But its growth is there -- it recently passed 200,000 users. Last week, it raised $55 million in a Series B funding round. 

The challenger bank claims it’s grown by 1,500% in one year.

Behind Lili are co-founders Lilac Bar David and Liran Zelkha. Both Bar David and Zelkha have about twenty years’ worth of experience in the banking and payments industries. They’re also not new to starting a challenger bank.

Prior to Lili, the two started a millennial-focused digital bank called Pepper, which was based in Israel. But the digital bank was very specific to the Israeli demographic. Lili came about as a way to expand these services into a growing segment.

“We were looking for a segment that is big and growing and changing and has specific pain points that we can solve,” said Bar David, who is also the CEO of the company. “So we came across this section between the freelance economy and the online economy, and all of the different changes that we're seeing within the US workforce. And that is how we decided that we want to build Lili to serve that specific finance community.”

According to Bar David, managing the financial side of a business when you’re a freelancer is especially overwhelming. Even if you use different tools for different aspects, because nothing is in one place, keeping track of these things can feel stressful. That’s where an app like Lili can come in handy.

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“You can choose from different products that are available out there in regards to expense management, tax reporting, tax savings, and invoicing and so on. But if you’re a one-woman show that means paying individually for every software and then aggregating all of the different information, while still making sure these tasks aren’t too time consuming,” said Bar David. “Meanwhile having everything embedded in just one app means that you will have more time to invest in your [actual] business.”

Lili’s platform allows users to manage both their personal and business finances in the same account. The challenger bank includes certain tools that are more tailored to the needs of freelancers. There are perks like no minimum balance or account fees, which could appeal to freelancers who don’t yet have a steady income, for example. Other features include expense tracking and financial insights.

The challenger bank also adds specific focus to tax-related pain points, which could be especially taxing for freelancers who are new to the game. There’s a feature called True Balance, which puts away money for taxes when the user gets paid. Another tool automatically categorizes expenses everytime the user makes a purchase through their Lili card. The categorized expenses can then be exported directly into a tax report.

In terms of next steps, Lili plans to zero in on payment and invoicing related pain points. Another thing the challenger bank plans on tackling is credit evaluations.

“From a traditional business model point of view, this specific segment is considered high risk. [Freelancers are] seen as something in between a consumer and a business, because they are not getting a stable income as nine to five employees,” said Bar David. “But from our point of view, we have a lot of data that we can use to better serve them from that point.”

But there could still be the question of what happens if users decide the freelance game isn’t for them, after all. Lili might then not have the same appeal. But according to Bar David, the appeal in that case would be having one foot in the water of the gig economy.

“The value proposition of the product makes a lot of sense if you're self-employed in a percentage of your income. So it doesn't have to be full-time work,” said Bar David.

Still, while the freelancing community is definitely the industry Lili wants to zoom in on, one challenge that does lie ahead is figuring out exactly how to define this market. That line between consumer and business can sometimes be a pretty hard one to pinpoint, let alone appeal to.

“We're building a new category,” said Bar David. “So shifting [the way people think about] banking services to not just be about business or consumers, but the segment in between is a major challenge.” 

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