Citi and PayPal are combining their two superpowers, and it could ease a giant headache for freelancers, gig workers, and consumers who want to get paid quicker

• Citigroup and PayPal are combining their respective superpowers to make it easier for corporations and governments to make payments to individuals around the world.
• Citi, an industry giant in payments for corporations and governments, and PayPal, a leader in consumer payments, announced a partnership Tuesday allowing Citi transaction banking customers to deposit money nearly instantly into digital wallets of PayPal's nearly 300 million customers in 200 global markets.
• The partnership, announced by the two firms on Monday, is in part a nod to burgeoning gig economy, wherein companies like Uber, Airbnb, Fiverr, and Etsy are facilitating short-term, self-employed jobs for millions across the world.

• Globally, the digital gig economy generated $204 billion in customer volume in 2018, according to a study by Mastercard, a figure it expects to climb to $455 billion by 2023.

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Drivers for ride-hailing apps, delivery workers, freelance contractors, designers of kitschy crafts. Gig workers of all stripes are familiar with the problem: The often cumbersome and sluggish rails running the global payment system.

Even in the best of circumstances, a system with account and routing numbers, multiple financial intermediaries, and paper checks can get gummed up. And if someone fat fingers a stray number? All bets are off.

Citigroup, an industry giant in payments for corporations and governments, and PayPal, a leader in consumer payments, think they've found a solution that will ease this headache.

The two financial giants are combining their respective superpowers to let large institutions circumvent the traditional payment system and deposit money directly into consumers' PayPal accounts.

Starting in early 2020, Citi transaction banking customers who use WorldLink - the cross-border payments platform that taps the bank's cornerstone global network that spans some 200 countries - will have the option of transferring money into digital wallets of PayPal's nearly 300 million customers, who are also spread across roughly 200 countries, providing nearly instant access to funds.

"We have over the last couple years been making some very massive and transformative investments in this business," Manish Kohli, the global payments and receivables head in Citi's Treasury and Trade Solutions division, told Business Insider. "We want to build a world where we can empower our customers to make payments as if there are no borders, no currencies, and no constraints."

The partnership, announced by the two firms on Monday, is in part a nod to burgeoning gig economy, wherein companies like Uber, Airbnb, Fiverr, and Etsy are facilitating short-term, self-employed jobs for millions across the world.

Surveys from consulting firms suggest more than 25% of the US workforce now engages in some type of gig work, even if just to supplement their primary income. Globally, the digital gig economy generated $204 billion in customer volume in 2018, according to a study by Mastercard, a figure it expects to climb to $455 billion by 2023.

But the slow pace at which corporations or governments often remit payments touches just about anybody, not just gig workers and members of the digital economy.

If a flight is delayed or baggage lost, an airline working with Citi could quickly reimburse a customer or provide a voucher using the email address connected to the customer's PayPal account. Insurance companies, pension funds, and government entities all issue payouts or refunds to constituents that Kohli said could be sped up through this partnership.

"For any kind of disbursement, we see this as a very strong, compelling use case," Kohli said.

This sort of capability isn't brand new. PayPal, which over the past three years has been inking strategic partnerships with a slew of companies it used to consider competitors, partnered with Bank of America last year for similar offering, albeit much narrower in scope and rooted in the US.

Citi's crown-jewel transaction banking business is tops in the industry, according to Coalition, thanks in part to its extensive reach and on-the-ground presence in financial systems around the world. The partnership has the potential to further entrench the bank with its customers by providing another payment option that bypasses red tape and trims costs.

And for PayPal, which has partnered with Citi previously on projects within its consumer-banking division, the deal further roots them at the center of the payments ecosystem, in addition to providing individuals quicker access to their money and easing a pain point.

"Citi creates global reach for us. Conversely, we complement them with use cases in these global markets that may be hard for them to get access to ordinarily," Jim Magats, PayPal's senior vice president of payments, product, and engineering, told Business Insider.

This solution could especially prove useful, Magats said, for the millions around the world without access to the traditional banking system.

"It creates an opportunity for people who are underserved to get access to their money in a seamless manner, " Magats said.