By Jessica Clempner, Rick Chavez, and Tiphaine Ramenason
A version of this article first appeared in Fintech Futures on April 24, 2020
Back in 2016, we wrote that the fintech industry had the opportunity to be a force for change on gender balance. We hoped that by starting with a blank slate, with the ability to channel the disruption mindset to rethink legacy approaches, fintech firms would move the needle toward gender balance. After all, why wouldn’t disruptors challenge convention not just in what they do, but also how they do it?
Fast forward to 2020 and it seems that gender balance is as thorny an issue for fintechs as it is for the big banks, if not more so. There is a confluence of factors at play – not just the lack of women in financial services, but also the scarcity of women across the tech sector, the barriers that women entrepreneurs face obtaining venture funding, wage inequality across the board, and toxic frat house behavior that has been widely reported. None of the issues is new or surprising, but the case for change has not been made strongly enough.
Tackling gender balance is not just the right thing to do. Clearly, diversity is good for business: It improves diversity of thought and, as a result, increases stability during volatility and times of crisis. And stability – or at least, letting ‘cooler heads prevail’ – is critical during the roller coaster start-up journey. But on top of this, as we’ve detailed in our Women in Financial Services 2020 report, there is a substantial unmet opportunity to serve the needs of women as customers – at least $700 billion in foregone revenue each year.
There is a massive opportunity for fintechs to take learnings from the traditional financial services industry, as well as what we’re seeing in tech. There has been a lot of talk about women in fintech over the last few years. This is a complex issue and judging by the little change we’ve witnessed, more work still needs to be done to change the status quo.Diana Biggs, Global Head of Innovation, HSBC Private Banking
Why can’t tech, which has been deft in benefiting from disruptive industry and customer trends, be a leader in applying disruptive energy to address gender imbalance in the workplace and the customer base?
There are a number of outstanding women leading the way in the fintech industry. But the overall representation of women remains low at the leadership level and throughout the workforce. Women represent just 14% of fintech boards – far below the banking sector, which reached 23% in 2019. 39% of fintechs in our sample did not have a single woman on their board. And HMT research found that in 2017, women represented only 29% of the fintech workforce, despite representing 47% of the overall workforce in the UK. The challenges are across the board.
It is really hard to find programmers who are women. It doesn't feel like a level playing field.Rosaline Chow Koo, Founder and CEO, CXA Group
A missed revenue opportunity
Most fintechs are not seizing the opportunity to fill the gap left by the incumbent banking sector in meeting the needs of women as customers, despite this being a real revenue opportunity.
Oliver Wyman’s survey of more than 5,000 individuals in Europe found that women feel worse than men when thinking about how to manage their finances with traditional banks. But the story is no better for fintechs – they have failed to close the gap.
There are some fintechs that are specifically targeting the unmet needs of women. Take Ellevest, which offers personalized, goal-based investment solutions to women as customers. Others focus on financial inclusion by addressing the needs of the underserved, a population that is often skewed toward women. Tala aims to make consumer credit accessible to everyone in emerging markets. And Stash provides personal finance and investing products for all regardless of income, to democratize financial opportunity.
This is a good start, but well short of demand: the revenue opportunity concerns all fintechs, not just those targeting women for specific “point” offerings.
The fintech industry has not capitalized on understanding the opportunity. Most build products for broad audiences, and in doing so do not overtly consider the needs of women as customers. It’s not about building products solely for women, but about considering the delivery, the messaging and fundamentally understanding underlying needs.Kevin Moss, Advisor and Former board member in the fintech lending and banking space
Better long-term stability
During the last financial crisis, the male-dominated business model adopted by incumbent banks proved unsustainable. By achieving better gender balance, fintechs could increase their resilience and chances of survival, emerging as leaders in the event of future economic turbulence.
It is critical for women to participate in the development of the fintech industry. Women are able to take risks – accepting measured and reasonable ones for good reasons – and to manage these risks. The world is rapidly changing, so we need unconventional solutions, open mindedness and mental mobility.Tatyana Zharkova, Managing Director, The FinTech Association of Russia
Many entrepreneurs today believe the purpose of companies is no longer just about creating value for shareholders, but about an obligation to better the communities and societies in which they operate. By representing and serving women, fintechs have the opportunity to bridge the gender gap in investment, retirement, and economic status.
What can fintechs do differently?
The case for change is clear, but gender imbalance in fintech is stark. It’s well past time for the industry to pull together and seize the opportunity to change. And instead of being a laggard, fintechs can lead the way and become a beacon of accomplishment for other organizations, from startups to multibillion-dollar organizations, in financial services and beyond. For those willing to do so, there are three clear actions to take:
1. Make internal diversity a priority – no matter your size
It has taken more than a decade of hard work and attention for incumbent financial institutions to start to embed inclusion and diversity in recruitment policies. Fintechs can learn from this playbook to jump-start the change – from proactively seeking at least two women candidates on recruitment lists, scrutinizing the impact of interview processes, creating flexible family policies, and setting explicit targets and measuring against them. In small and rapidly growing companies, it is essential that this is established as a priority – not left to best efforts or, worse still, only considered retrospectively.
In fintech, we need real innovation. It’s exciting to see how society is going to change this way, but run by established white men from the banking industry is not how we’re going to embrace it.Dame Jayne-Anne Gadhia, UK Government Women in Finance Champion, CEO UK&I of Salesforce, Chair of Snoop
2. Shift the culture
As new firms are built and grow, so do new cultures. From the outset there is an opportunity to create an inclusive culture that is open and respectful and that values diversity. This needs to come from the leadership, with a clear tone from the top and expectations set around accepted behaviors. For the more established fintechs, this means taking the time to really understand the culture and subcultures in the organization by talking to colleagues, new hires, and missed hires. It is this insight that can be used to identify the problems and their root causes and start to shift the organization.
What can we do to overcome our biases? To look around every day and say, what are we missing? Are we creating (and nurturing!) an inclusive environment. For QED to be sure, but also our portfolio companies. It’s the only way to reach true gender equality in fintech, venture capital, and more broadly, financial services.Nigel Morris, Co-Founder and Managing Partner, QED Investors
3. Innovate with a ‘Customer First’ mindset
Look at gender-disaggregated data and talk to customers to understand the unmet needs of women. Doing so will uncover a real commercial opportunity. This insight can be used to fuel innovation and customer-led design to create a proposition that not only disrupts the incumbent market, but delivers better for all of your customers.
If you consider the percentage of women who make household financial decisions, and you take a look at how much of the world’s discretionary income is controlled by women — then you’ll understand the untapped potential of our economic power. There are fintechs doing well, but they’d do a lot better if they addressed the needs of women in their products and in their workforce.Joanne Bradford, President, Honey