How Banks and Fintechs Are Collaborating to Support the Creator Economy

  • Banking
  • 04.10.2022 02:20 pm

Worldwide, the creator economy is blooming. There are more than 2 million people who consider themselves professional creators, plus another 46.7 million “amateurs” from whom more pros will emerge. The creator economy is estimated to have a market size of around $104.2 billion, with a growth trajectory that’s predicted to be similar to that of the gig economy, so we’re looking at potentially trillions of dollars of value.

As creators diversify and find more ways to monetize their content, the number able to earn a living is growing. There’s still a gap between super-creators and the long tail of part-timers, but 43% make a livable wage of $50,000 or more, and 78% earn over $23,500 a year. Of the 70% who work as a creator full time, over three-quarters earn more than the average bartender.

With the average annual creator income reaching parity with that of an entry-level software engineer, the creator middle class is emerging.

This career model might seem alien to older generations, but when it comes to finance, creators’ businesses are the same as any traditional business, with the same needs for funding and loans, banking solutions, credit, and more.

In response, there’s a growing ecosystem of fintech startups to help creators manage the financial side of their businesses more smoothly. Change can be slow: most banks fail to understand the sector, which is holding them back from meeting its needs, and even many fintech platforms aren’t sure how best to help creators. But new tools are appearing, and existing ones are adjusting, to serve the financial needs of creators.

Business banking tools

Banks and existing fintechs often want to serve creators, but they aren’t sure how to do it. “This is the first truly digital generation, who never knew life without social media and smartphones” says Nicole Epstein of vcita. “While most financial institutions realize Gen Z’s digital nature, not all of them are aware that a digital portal isn’t enough.”

That’s why vcita, which specializes in tools to help microbusinesses and freelancers organize their time, relationships and finances, recently launched a suite of functionalities to ease the friction around getting paid for gig work. In the past year, the Seattle-based software company has also partnered with fintechs like NorthOne and Next Insurance to further empower freelancers.

Beyond getting paid in time, many in the creator economy find obtaining financial backing to be elusive. Traditional banks are often confused about providing creators with lines of credit or even accounts. Even established fintechs generally require either a minimum balance, or a minimum monthly direct deposit, before they’ll approve a new account, but those don’t match creators’ earning patterns. As iconic creator economy figure MrBeast observes, “Can you even imagine trying to explain the value of your YouTube channel to a bank?”

As a result, many creators are using creator-focused tools like Karat financial, which is currently only a credit card, or Willa, still primarily a payments service, as a de facto banking system. But the infrastructure of the creator economy is starting to appear. New creator-oriented banks are arising, like CreativeJuice, which offers accounts that are free except for a $5 wire fee.

Other new fintech startups are offering useful banking tools that meet creator needs, like Catch, which connects creators with benefits. It provides easy access to health insurance, automatically deducts money for taxes and sends it to the IRS, and has integrated savings and investment accounts so creators can build savings and pensions.

Access to credit

Creators can struggle even to get a credit card, let alone business funding, to extents which sometimes seem ludicrous. Alexandra Botez earns six figures playing chess on Twitch, but she was rejected twice for a business credit card. The creator of the TierZoo YouTube channel, who has 2.7 million subscribers, couldn’t rent an apartment because the landlord didn’t see his business as legitimate.

“Banks need to understand you in order to trust you, and it’s only when they trust you that they’re willing to give you credit, process your payments and hold your money,” explains Eric Wei, founder of Karat Financial.

Karat is one such understanding solution. For the moment, it offers a credit card for creators where credit limits are based on revenue and social following rather than classic credit scores.

Perhaps that’s why Karat has enjoyed 50% growth month on month, and processed transactions worth eight figures, since its launch last year.

Help with cash flow

Like other businesses, creators also need a little help with their cash flow from time to time. For 77% of creators, the majority of their revenue comes from brand deals, but those brands don’t always pay out on time.

Hence the need for new tools like XPO and Willa. XPO is a digital banking app that offers invoice-financing for UK-based influencers, promising that users will get paid within 24 hours of finishing a project. Willa offers a similar service, helping creators claim the payments owed to them by brands. “The last year, a lot of investors have realized this space is in dire need of help,” says Kristofer Sommestad, a Willa co-founder .

In the same vein, CreativeJuice lets creators connect their AdSense account to get payments immediately, instead of having to wait 30 days for YouTube to pay up.

The new creator financial ecosystem is on its way

The booming creator economy isn’t just a flash in the pan and is far more than just a hobby on the side. Creators deserve financial tools like cash flow solutions, bank accounts, and credit sources that understand their mode of business and match their financial rhythm. Thankfully, fintech and banking solutions are growing to meet them, laying the foundations of a solid creator sector.

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