By the end of the first half of 2021, there were already 24% more fintech start-ups than in the whole of 2020, and by 2026, the global fintech sector is expected to be worth $324 billion. This growth brings with it a greater opportunity to affect positive change not just in financial services but throughout the world.
The fintech industry has undergone some positive progress around diversity in recent years; however, more work is needed to be done before we can call fintech a truly inclusive industry. To achieve inclusivity, we must understand the different capacities and wider issues of diversity; this, in turn, will allow us to deliver more relevant and sustainable fintech solutions.
Systemic change requires every person throughout a company's hierarchy to play a part in introducing and creating an inclusive environment that resonates at every level. Many Fintechs look at complex situations and attempt to solve them with innovation. While embracing innovation is a great solution for financial or business situations, innovation isn’t the key to solving the looming industrial diversity problem.
While great diversity problems still do exist, good progress has been made in recent years. Financial services have long been perceived as a male-dominated sector, but within fintech, women are more visible than they have ever been. Today, almost 30% of the UK fintech workforce is female. As we move towards gender-equal representation, however, seeing more women in prominent senior roles will be crucial. Only 17% of senior roles in fintech are held by women, and only 12% of founders are female, though both these numbers are steadily growing.
Even with all the undeniable progress, women are under-represented in fintech. To claim otherwise would be to contradict factual evidence. This continued dominance of men in fintech, especially in senior positions, is often put down to the excuse of the lack of female job applicants. However, the fact that fewer females have the STEM qualifications required for most fintech roles suggests the problem goes much deeper into the foundations of higher education.
As fintech matures as an industry, the market will reward organizations that embrace diversity as a key component of corporate governance and a key driver of innovation and customer satisfaction.
“Hiring people with diverse traits and experience creates an environment where outside the box ideas are heard.”
Research shows that companies that embrace diversity “out-innovate and out-perform” others, increasing both existing market share and growth in new markets.
The other business imperative for embracing diversity, of course, is the need to understand and better reflect a diverse customer base. For example, Fintechs that are able to better understand and align their insurance, savings, mortgage, and wealth management products with the needs of their LGBT, ethnic minority, and female customers will have clear competitive advantages in those specific sectors. As fintech startups continue to section off their demographics to take on and explore new areas of the fintech market share, this competitive advantage can make a huge difference in the impact the startup will have in the space.
Cultural change is not quick or easy. Here are ways to add diversity into the Fintech Industry:
Engage leadership. The first step to diversity is ensuring the CEO is on board. Without the CEO’s full and visible commitment to improving diversity and inclusion, no change will happen. Change starts at the top and then trickles down to senior managers and their departments.
Identify and target the problems. The next step is to diagnose the problem and set targets for improvement. The CEO and senior leadership need to have a granular set of data to identify the problem areas. Once the key problem areas are known, management must set targets that will be regularly reported, audited, and measured like any other business goal. These targets should also be embedded in managers’ balanced scorecards.
Eliminate bias in recruitment. To improve diversity in recruitment, firms need to begin at the beginning and eliminate gender-biased language from job advertisements. Diverse interview panels need to be established in the selection process. And if the selection is being done through recruiters, the search firms need to be instructed to deliver a diverse slate of candidates.
Train management. Managers must be trained to manage with a diversity mindset. Management must involve the following four steps into their training programs: awareness of the possibility of bias; understanding of the direction of the bias; immediate feedback when falling prey to this bias; and a training program with regular feedback, analysis, and coaching.
Sponsor diversely. Sponsorship is also very important. Like a mentor, a sponsor gives advice and guidance, makes introductions, and gives feedback. These relationships occur naturally, and currently, white men are the dominant group with the ability to provide sponsorship. Men are 46 percent more likely to have sponsors than women, and Caucasians are 63 percent more likely to have sponsors than professionals of color. Managers and those in a position to sponsor others should cast their nets widely and deliberately sponsor more diverse mentees.
It’s clear that fintech companies need to respond to the challenges of the new digital age. Short-term financial priorities are being tackled, and while they are important and need to be resolved rapidly, long-term cultural issues are often overlooked and not addressed properly or even sometimes at all. If leaders don’t prioritize diversity and inclusion as a business imperative, companies will begin to suffer long-term consequences, missing out on top talent and failing to adapt business models quickly enough to remain competitive. The bottom line is that diversity in business is a financial issue, not a social one.