How To Shift Gender Balance In Fintech

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.

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? 

The data

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.

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. 

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.

Building community

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.

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.

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.