The Growing Side Hustle Economy Is an Opportunity for Banks

Entrepreneurship will continue to surge in 2023 with millions of Americans starting new businesses this year, according to a new study on small business growth.

The main drivers are inflation (66%), which creates the need for more income, and technologies (45%) that simplify starting and doing business. Most of these new business owners (65%) are planning to keep their day jobs, choosing to create side hustles to increase their income while retaining the safety net of their nine-to-five. For banks, all of this means opportunity.

These entrepreneurial endeavors — traditional small businesses, micro-businesses, and side hustles — have one thing in common: the need to track money beyond the services of a typical retail bank account.

Banks are uniquely positioned

These new business owners are already bank customers, and the goal for their banks should be to ensure continued satisfaction by providing services that fit the side hustle model. Like all businesses, side hustle businesses need support to manage their finances successfully. Banks are uniquely positioned to provide this support because:

• They are already serving these customers and can easily identify the flow of micro-business income and expenses going through their customer accounts.
• Most side hustles are run, at least in the beginning, through the owner’s personal bank account, commingling personal and business transactions.
• Side hustle business owners seek a banking solution that is willing to take on a really small customer and grow with them.

Some of these small businesses may not survive past five years, but around half will — a sound investment in the future. Some will not only survive, but thrive and grow, providing healthy returns to the banks that support them.

How banks are addressing small business needs

There are traditional banks that are partnering with “neobanks,” fintech firms that offer special software and other technologies to help service small business customers. This makes sense, but this isn’t necessarily ideal for the traditional bank who then doesn’t have a direct relationship with the small business customer.

Unfortunately, most traditional banks are not set up to service truly small business customers. They are accustomed to retail and commercial banking, but lack functionalities and services that help side hustles, micro-businesses, and many small businesses. A business with low cash flow doesn’t need the complexity of a commercial bank, and a personal bank account is too simple.

One place banks can start offering better income and expense tracking services is inside personal accounts, since 90% of micro-business owners are using these for business purposes.

What small businesses truly need

Small businesses, micro-businesses, and people running side hustles or doing gig work need simplicity, not complex and disparate financial platforms with single functionalities. With the need to track expenses and income at the top of these customers’ list, banks are well placed to expand on their offerings. These customers also need the ability to invoice, create financial reports, do general accounting and bookkeeping, and track their tax obligations.

I often tell people that of the thousands of small business owners I’ve talked to over the years, not a single one has said they like having multiple platforms to track their business finances.

How Tight can help

Tight is the perfect solution for banks, offering a white label version of our small business accounting platform that fits seamlessly into a bank’s online customer portal. We help banks provide targeted features to their small business customers, which allows business owners to focus on growing revenue and spend less time tracking finances.

If your bank is trying to figure out the most expedient way to provide the growing number of side hustle customers you have, check out the Tight API and give me a call. I love explaining to people how easy providing exceptional financial services can be.