Spend enough time on the fintech conference circuit and you are likely to grow used to the sector’s idiosyncratic male-only panels, sea of suits and longer queues in front of the men’s restrooms.
Yet even the most hardened fintech veteran will be somewhat taken aback when confronted with the actual numbers on the sector’s gender problem.
Of the 100 fintech companies that raised venture capital funding in Europe in 2015, only five had female chief executives, and of their total 364 key executives, only 7% were women, according to an FN analysis of Dow Jones Venture Source and Factiva data.
There was no significant improvement from 2014. It sounds encouraging that from 2014 to 2015 the number of female-led European fintech startups among the top 50 by funding doubled, according to DJ Venture Source data – except that it went from one to two. And it promptly halved again when one of the two women left her job in January 2016.
The facts paint an indisputably unflattering picture of the state of gender diversity in fintech.
However, despite the abysmal diversity track record, the sector has been on a roll.
Venture capitalists poured $1.44 billion into European fintech startups in 2015, up 17% from $1.25 billion the previous year,according to DJ Venture Source. Increasing moves in the space by large institutions seem to indicate that digital finance is going mainstream.
With activity booming, it does not look as if lack of gender balance is holding the sector back. Some might ask whether correcting the imbalance needs to be high on the agenda.
Why worry that, of chief executives who raised funding for their fintech startups in Europe in 2015, if you add together those called Michael, Sebastian and Nicholas they outnumber the women? What’s the industry losing out on? Both 50% of the world’s talent and with it different perspectives and a diverse point of view, executives believe.
Diversity fuels creativity, which in turn sparks innovation, executives note. So by being bad at gender diversity, fintech might end up being a lot less innovative than it could be, executives argue.
Léa Veran, chief marketing officer at Paris-based startup Finexkap, said: “If fintech remains unattractive to women, however caused, the industry will keep on depriving itself of half of the potential talented people that could pull the fintech startups up.”
Diana Paredes, the chief executive and co-founder of London-based startup Suade Labs, said: “Diversity is always a good thing, there are enough stats on that, and different point of views are critical to making a great product.”
“So, for me, the biggest thing the industry is missing out on is a lack of potential innovation and diversity of ideas.”
Numerous studies document the positive impact of diversity on a business’s bottom line, and fintech businesses are no different, according to executives. Public companies in the top quartile for gender diversity were 15% more likely to have financial returns above their national industry medians, according to a recent study by consultancy McKinsey.
Yet it is perhaps even more urgent for fintech to increase its diversity levels, executives say, because of one of the very ambitious goals it has set for itself: to drive access to financial services for millions of unbanked people worldwide through new technologies such as mobile.
Lawrence Wintermeyer, the chief executive of UK fintech lobby group Innovate Finance, said: “We need a diverse fintech ecosystem if we are to create a more inclusive financial sector that offers services that reflect the needs of the societies we are meant to serve.”
As household financial managers in many emerging markets, women play a “critical role in the success of any mobile financial services deployment”, according to a report from mobile operators lobby group GSMA. Yet a “consistently overlooked theme in these discussions has been women, including their wants and needs for and use of mobile financial services”, it adds.
The report analyses household financial management decision-making in four emerging markets – Kenya, Tanzania, Papua New Guinea and Pakistan – and notes that while men earn the majority of household income, women tend to take responsibility for a “significant portion” of household financial management decision-making. For example, in Pakistan, 39% of women who earn no income are responsible for paying bills or saving for family needs, according to the report.
Diversity is important, because products for those markets that are designed and coded only by men might end up being unfitted to the needs of an important user base, executives argue.
Sam Maule, emerging payments practice lead at Carlisle & Gallagher Consulting Group, said: “If we are strategising, designing, and funding products designed by only a subset of engineers and executives, men who basically look like me, are we truly servicing our target audience? Are we addressing their real needs based on our own life experiences, our community, our preferences?”
The argument also holds true for developed markets, where financial technology is helping reshape how consumers and businesses spend money online. With women expected to control more than two thirds of consumer wealth in the US over the next decade, according to marketing agency FleishmanHillard, a product’s success rests on whether it appeals to women.
Clare Flynn-Levy, the chief executive and founder of behavioural analytics startup Essentia Analytics, said: “If a fintech product that is going to be heavily used by women is designed and sold exclusively by men, those men are likely to be disappointed by the outcome, as will the women.”
There are numerous examples of products that undermined their own purpose because they were not developed with women in mind. For example, until recently most of the dummies used to test car safety represented average sized males. In 2011 a study by the University of Virginia found that women were 47% more likely to suffer severe injuries from car crashes because car safety features were designed largely for men.
Elizabeth Lumley, a director of global ecosystem development at Startupbootcamp FinTech, also recalled how early voice recognition software struggled to understand female voices.
Lumley said: “The lack of women in fintech is a huge problem. Women are half the world’s population.”
While it is clear how having a woman’s input in developing products for consumers is beneficial, it is harder to make the connection for enterprise financial technology. Does it matter if a blockchain-based system to settle stock trades is designed and coded by a testosterone-heavy team ?
Lumley believes diversity matters, regardless of the type of product, because any business led by a “sea of old white men” will lack diversity of thought and ultimately create products and services that are more “boring”.
Duena Blomstrom, a fintech consultant and former chief marketing officer at startup Meniga, agreed with Lumley, noting that even if your company farms chicken, lack of diversity will mean you will end up with “very boring chicken”.
While most in the industry agree, at least publicly, that there is a business case for diversity, views differ on what is useful to drive change.
Some, like Blomstrom, prefer “a less talking, more doing” strategy, meaning it is more important for women to take the industry by storm through positive example rather than spending time discussing the gender gap.
Others believe it is important to do both and welcome initiatives such as meet-ups for women in fintech and reports that champion successful women in the industry.
Maule of Carlisle & Gallagher said: “I believe one of the keys to addressing the diversity issue is to address the diversity issue. Talk about it. Not lip service, but actually share your own personal stories with your co-workers and with your management teams.” The discussion should be an ongoing conversation involving everyone, both male and female, young and old, Maule said.
In 2015, Maule teamed up with Innotribe, the innovation arm of payment network Swift, and the Digital Finance Institute to compile an index of 400 power women in fintech across the world and with different levels of seniority.
The project has evolved into a website called Femtechleaders.com that publishes interviews with these women, with the goal of promoting the stories of successful women at various level of seniority within the industry. FemTech Leaders recently hosted meet-ups in New York and London.
In Europe, meet-ups are also organised by Women in Fintech, a Paris-based initiative that promotes diversity through events and by highlighting the stories of successful women in the industry or of companies getting close to a gender-equal team, according to Finexcap’s Veran, the organisation’s president .
Maule said the FemTech Leaders project helped him discover that “seeing is believing” is important in encouraging younger women to pursue careers in the industry.
Scarlett Sieber, senior of vice-president of Open Innovation and Ecosystem Building at BBVA, agrees that one of the obstacles to women entering the fintech sector is the lack of visible role models at senior levels, who reflect “you and your personal story”. These senior role models can help younger women “visualise success”.
One of the explanations given to the gender gap in fintech is that it brings together finance and technology, two notoriously male-dominated worlds. This reduces the talent pool of women with the experience and skills needed to launch or manage a fintech venture, executives say.
Céline Lazorthes, the founder and chief executive of Leetchi, a French payments startup that was acquired by bank Crédit Mutuel Arkéa, believes that casting the net wider would help fintech to diversify.
She said: “You have to welcome the idea of recruiting from other industries and look for high-calibre candidates with potential rather than simply seeking a ‘copy & paste’ of skills. I also believe there is a sort of virtuous circle. The more women in a company, the more female applicants you will get.” Leetchi’s chief technology officer is also a woman.