The problem of diversity within fintech is not a new one.
The deficiencies in equal employment and investment have been widely reported for years, yet it still shows very slow improvement and, in some cases, seems to be declining.
According to research firm PitchBook, in 2021, US startups founded by women raised almost $6.6 billion. This was a record amount and an 85% increase on the previous year. However, it only amounted to 2.1% of total VC investment that year, the lowest share since 2016.
When taken to a global scale, results are even more dismal, with only 1% of VC funding going to firms founded by women.
So why is this happening? One argument could be that the lower funding percentage is proportionate, with female founders only making up 6.1% of company founders worldwide.
Still, when we look at employment statistics of females at a senior level, the lack of diversity becomes a trend.
Ine Holvoet, co-founder of Inforcrypt, factors in with her experience.
“It was really hard to get funding, as a young woman it was hard to convince investors to buy into my idea…it’s harder to stand your ground and say it’s going to work, but in the end, I got what I needed because it’s not really about your gender, it’s about the things you try to make your business work,” she said.
This is an opinion that echoes that of many female leaders in the fintech sector. In the annual FT Partners Women in Fintech webinar, Anne Boden, founder, and CEO of Starling Bank, told of her experience as being similar.
Eventually achieving success through determination and maintaining a “pure vision,” she stated that all it takes is one investor who looks at the numbers in detail and buys into the vision despite the founder being “someone that doesn’t look like him.”
Fintech combines two traditionally male industries — technology and finance, so it is perhaps unsurprising they have a long way to bring equality to the workplace.
The reports of sexual harassment and apparent ‘bro culture’ in these sectors do not create an inviting work environment for women, despite movements to improve policies surrounding these issues.
Aside from this, women are incredibly underrepresented in the study fields of Science, Technology, Engineering, and Mathematics (STEM).
In the UK, for example, data from UCAS, the national higher education admissions service, showed that 26% of undergraduates in STEM subjects were female, most of which were in physical sciences. When this data was narrowed down even more to Computer Sciences, Engineering and Technology, female undergraduates only made up 16%, a number that translates into careers in these sectors.
On average, 20% of all jobs in tech globally are held by women, according to the survey carried out by Velocity Global. This is despite 74% of girls expressing an interest in a career in STEM subjects.
Gender employment inequality is not confined to fintech. In a global survey carried out by Equileap it was found that of the 3,702 companies reviewed, only 10 had a gender balance in the workforce (40%-60% female employees). However, the finance and tech sectors are notorious for their proportionately low levels of senior-level women. With the average boardroom diversity of all industries at 24%, the 11.3% mentioned above in the fintech sector is a stark contrast. Gender equality is also seen to be slowly improving in other industries, a trend that is not as apparent in fintech.
In response, some policies are being implemented to improve the status quo, which can be seen in statistics.
According to the Findexible FDR radar, just over 40% of fintechs have at least one woman on the board of directors, on average amounting to 1.47 women and five men for companies with up to 1000 employees. The number of women on the board was “too low to be statistically relevant for larger companies.”
Despite this, given the disproportionate number of women to men, it raises questions of the amount of impact that female voice has.
Inequality in fintech varies in scale according to the global area of study.
Africa, for example, has the highest percentage of female board members at 14.3% and fairs the best globally in terms of female founders with 3.2%, compared to the global average of 1.6%.
On the other hand, North America was found to have only 0.7% of companies with only female founders and 90% of companies with no female founders at all.
In apparent contrast to these findings, according to research carried out by FT Partners, North America has the highest number of fintech unicorns led by women, with 12 in the U.S. and two in Canada, making up 11.4% and 40%, respectively.
Why is diversity important to fintech and innovation?
Although diversity is essential to all industries, it is imperative within innovation, a fundamental factor to fintech and the development of new solutions.
This diversity applies on many levels in professional background, heritage, economic background, sexuality, and gender. All aspects bring different insights to the professional ecosystem and add to the capacity to spot market potential and innovate.
The importance of diversity distribution is also multilevel, spreading across all company functions to provide new insights, from senior level and general strategy decisions to customer engagement and the possibility of analysis of consumer trends.
Currently, the gender diversity of fintech users is also low. Although companies are reluctant to share data on this subject, the little available data shows a deficiency in female users of fintech.
In a paper released by the Bank of International Settlements (BIS) on the gender gap in fintech, they identified that 25% of the respondents who used fintech entrants showed a 20% difference in adoption according to gender could not determine significant reasoning for this difference.
The small amount of data that has been released mirrors these findings. Coin Dance, a company providing statistics for Bitcoin users, found that women accounted for 5.7% of investors. Starngage, a firm focused on tracking social media follower data, shows that only 23.2% of Monzo’s online followers are female, despite being one of the most diverse companies with a strong policy of diverse employment and females making up 40% of senior-level positions.
According to PwC, 54% of companies said a greater customer engagement strategy helped define innovation. A focus on a diverse customer base is also relevant to increasing the development of the fintech sector.
What is being done to change this?
Although the issue of diversity in fintech is pronounced, it has been recognized by the industry, and there are increasingly more funds, initiatives, events, and education programs focused on reducing the divide.
Holvoet comments, “I think there is something shifting and changing, the mindset that if you’re a man or a woman it makes you better or worse, it doesn’t make sense, it’s the old way of thinking, and I do see things changing to a more human perspective.”
Companies such as investment firm Clearco have models to support this thinking, adopting an approach to receiving pitches that focus on the assessment of the company’s data rather than the person behind it.
Education programs such as the Lendit Fintech and London Institute of Banking & Finance Fintech Practitioner program for female professionals center on expanding education into fintech-focused fields. Others focus on younger generations, such as Ireland’s I Wish, aim to improve and encourage female education in STEM subjects.
As well as this, organizations such as 100 Women in Finance and multiple industry events are focused on advocacy of diversifying the industry, and female leaders in the field are being called upon to raise awareness.
“I think the best thing we can do as women is support each other,” Said Holvoet. “It’s really about the community and working together to achieve the same goals… I like to keep myself motivated by the other women that inspire me in this space.”
Isabelle is a journalist for Fintech Nexus News and leads the Fintech Coffee Break podcast.
Isabelle's interest in fintech comes from a yearning to understand society's rapid digitalization and its potential, a topic she has often addressed during her academic pursuits and journalistic career.