$23 billion per year. That’s the transaction fee revenue of PayPal, and all freelancers contribute to this figure significantly. The question is: how to change this?
In the current system, payment processing companies and marketplaces charge enormous fees to freelancers.
However, Web 3.0 could transform the freelancing market.
That’s where JumpTask comes in, which has one vision: to facilitate entry to the gig economy for beginners using decentralization. Here’s how.
> Heavy transaction costs imposed by middlemen hurt freelancers;> From the payment providers, PayPal alone generates $23.4B in transaction revenue;> Marketplaces such as UpWork or Fiverr charge between 5%-20% per transaction;> JumpTask uses blockchain technology to minimize transaction costs;> Decentralization will bring cost-efficiency, speed, and transparency to the gig economy.
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Payment Processing Companies: PayPal’s Case
The biggest payment processing provider in the world is PayPal. Among its competitors, it held more than 50% of the payment processing technologies’ market share. PayPal dominates the industry and is far ahead of its competitors like Stripe, Apple Pay, and others.
Due to its market dominance, the company can charge enormous fees to freelancers. The fee structure is as follows:
- Processing fee: between 1.9% and 3.5%
- Fixed fee: between 5 and 49 cents
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Therefore, a $100 transaction costs between $2 and $4 ($3 on average, or 3%).
An average hourly rate of a freelancer is estimated to be $21 per hour. If an 8-hour work day is assumed, a gig worker’s annual fees sum up to $1,310.40!
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But there’s more:
- Instant transfer costs an additional fee of 1%
- Currency conversions have a fee too, which size depends on the currency
High transaction costs benefit PayPal’s growth. Conversely, freelancers, especially those on lower incomes, are disadvantaged and have difficulty entering the gig economy.
Check other barriers to entry to the gig economy that JumpTask is tackling:
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Payment providers alone bring significant friction to the freelancing industry. However, they are not the only middlemen involved.
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Freelancing Platforms: UpWork’s Case
Gig marketplaces connect freelancers who are looking for work and companies. While this helps gig workers find opportunities, they pay hefty fees to use marketplace services.
UpWork, for example, is a well-known player in the freelancing space. Due to its size and popularity, the company can charge high fees on income:
- 20% for the first $500
- 10% for $500-$10,000
- 5% for $10,000 and above
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Significantly, lower-tier earners and micro freelancers are affected the most. Even a small gig on the side instantly costs 20% for the freelancer. As a result, beginners are deterred from entering the market at all.
As PayPal is not the only payment processor, more marketplaces charge even higher fees. Fiverr, for example, takes a 20% fee for any task completed, irrespective of the income generated. Thus, for a $1000 transaction, a freelancer gets only $800.
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JumpTask Solution
JumpTask has a vision of a decentralized platform built specifically for the gig economy. Blockchain technology will enable freelancers and businesses to interact with each other without any middlemen.
You can read more about the JumpTask project vision here:
When direct interaction is enabled, freelancers will save a lot. Instead of paying high transaction fees for payment providers and Web 2.0 marketplaces, gig workers only pay the minimum cost of a gas fee. This fee is needed to complete transactions on the blockchain.
Moreover, decentralization would make the system more fair and transparent. Low-income earners would not be put at a disadvantage. In addition, there should be fewer disagreements about the transfers or task completions, as all of this data would be publicly available.
JumpTask is transforming the micro-task market first. That’s because micro freelancers are pressured the most because of the high transaction costs. In the long-term, it becomes unprofitable for people to participate in the gig market.
However, JumpTask’s vision extends further. After the micro-tasking industry, the team plans to shift the whole freelancing market into the Web 3.0 space. The industry needs an upgrade, and it’s only a matter of time before it arrives.
JumpTask will be there when it does.
Liking what you hear? Sign up on JumpTask. Invest in $JMPT. Join the revolution.
