Global outrage was triggered by an event of police brutality that came in a long line of other worldwide examples of anti-black violence – but the pressure was on to make sure everyone knew that these recorded situations of racist violence are not the only things BIPOC (black, indigenous, people of colour) face. There is systematic bias in governments and society, and there’s plenty in private industry as well. Fintech is no different. And whilst there have been massive pushes to get gender diversity right in fintech, women are not the only ones who need a seat at the table.
Our Features Editor Sophie Camp looks at how far have fintechs in North America, Australia, New Zealand and Europe have come in their racial diversity both in the boardroom and in their offerings, and the problems that have yet to be fixed.
Fintech diversity as it is now
Whilst the ‘tech’ part of fintech has seen increasing diversity across the board, the ‘finance’ part doesn’t have a similar push. If we look at many of the fintech companies that we speak about and interact with in our daily lives, many were born from the minds of people who have worked previously in the finance industry. Perhaps from investments, VC, traditional banks, or even if they are young enough they got started in blockchain and cryptocurrency.
And access to those industries from the get go is still an incredible white, male sport. It was only in 2018 that JP Morgan had to pay $19.5 million to current and former black employees who had won a case of racial discrimination whilst working as financial advisors. If so few BIPOC people already exist in the financial industry, the amount who leave to set up their own company or have the skills or desire to move into neobanks and fintech diminishes even further. Dean Penn, writing in Finovate earlier this year, summed it up neatly:
“…it remains true that there are fewer African American and Latino/Hispanic founders and CEOs in fintech relative to other areas of technology, including education and health-related tech fields.”
Fintech has made a lot of noise around gender diversity – which is great. But that is not a full picture of diversity that the industry needs.
It’s not just boardrooms
It’s important to stress that financial inclusion does not just start with the people who launch, grow and power fintech businesses. Financial inclusion across the board means that everyone has the same access to the financial system as the rest of the country they live in.
The United States is a perfect example of this disparity. A February 2020 study by McKinsey revealed that ‘nearly half of black households are unbanked or underbanked —a disparity that, over the course of a financial lifetime, can cost nearly $40,000 in fees.’ The feeding factors into this statistic are many and varied, and a lot of these issues need to be laid at the door of legacy banks. African American family earning power is less than one-tenth on average than a white family, and that lower earning power translates into a lack of access to checking accounts, savings, and investments. All of which, from traditional banks, can be a frankly expensive endeavor.
How can fintech help? Neobanks have been hugely beneficial in providing access to bank accounts in developing countries where people may have simply never banked, and survive totally on cash. But neobanks based in countries like America should consider that there are communities at home that would benefit from the lower barriers to financial services that neobanks offer. But it’s not just as simple as creating a product and hoping that it reaches the right people. Support, education and listening to the communities themselves needs to be done. If people don’t understand the benefits of fintech and don’t have trust in financial services, they will not sign up in the same way that an average white customer, even if proportionately they could benefit much more.
Fintech firms that build themselves from the ground up with this endeavor in mind are becoming increasingly more common – particularly in America. Black banks have been around for some time, albeit on a frustratingly small scale, but they are now able to merge with new financial technology to help increase their footprint.
It would be incredibly uneducated, unhelpful and ultimately damaging to point at BIPOC communities and say ‘go on then, make your own fintech’. This is not what increasing diversity and BIPOC voices in fintech is about. After all, you have to look at the whole infrastructure of financial technology: its life cycle.
Look at venture capital firms. For many they are a place where fintech startups get their injections of cash, big or small. It’s not the start of the life cycle of a company, but it certainly can be a formative one. The Information’s VC Diversity report in 2019 looked at the gender and racial diversity of venture capital funds in America, and the report was stark: “the VC industry’s progress on diversity is halting at best. Some 85% of the U.S. industry’s decision makers are men and 73% are white, barely down from 2017.”
The key words there are ‘decision makers’. It’s undeniable that venture capital firms have a lot to say in which companies become successes and which never get off the ground. If those with the financial power are white men, do we really think that their decision-making is going to reflect a diverse range of companies and needs? Either through actual bias or simply through just not understanding something which they have never had to face themselves.
And that’s just how fintechs get their money. There’s a whole myriad of interactions and dependencies upon the industry’s infrastructure that are not inclusive, and sometimes are actively against BIPOC and their ideas.
What can be done?
I am not going to imply that I have the answers – and as a first step, the fintech industry needs to do the same. Answers and next steps come from a mixture of listening, earning and actually doing. It is not up to BIPOCs to educate their white colleagues in fintech and push them in the right direction. If diversity is going to be achieved in the fintech industry it will come from a concerted effort to shift mindset, focus, and education. Listening is the first and most important step.
People, ideas and needs are different – and their considerations, skills and voices need to be included to solve fintech’s diversity problem.