Follow the Money

Women are the future of fintech—but in the here and now, they’re still being underserved in an industry otherwise marked by explosive growth. Here’s why that must change.

Women and the Future of Fintech

Rachel F. Sifuentes

June 8, 2022 09:23 AM

FINANCIAL TECHNOLOGY—a burgeoning industry known universally as “fintech”—needs technology-driven women now more than ever. The financial-services sector is constantly evolving, and innovators are transforming the business world globally through new means of providing such services. Female executives, investors, entrepreneurs and attorneys all have a vital role to play in fostering this innovation.

Finance has long been a boys’ club, but pioneering women are using their creativity and spirit of exploration to rise to fintech’s peak. As they do, they’re looking for guidance and help to achieve their goals.

It’s critical that technology attorneys advise their clients in this fast-moving and highly regulated digital sector of the economy. Gaining an understanding of fintech will help tech attorneys better serve their clients as they grow within it.

What Is Fintech?

The word describes technology that seeks to automate, modify or otherwise enhance the delivery of financial services, helping both businesses and consumers with their financial operations. Fintech includes software products that ensure fast, easy and secure transactions for lending, payments, insurance, investments and other traditional banking services via digital channels. It also encompasses mobile applications for financial services, such as ubiquitous peer-to-peer payment services like Venmo, Square and CashApp. Other breakthroughs include trading platforms and the blockchain, a distributed ledger technology for transactions that has enabled the development and use of cryptocurrencies.

The goal of fintech is to streamline transactions with technological innovations and make it easier to manage personal and commercial finances. It has been around since the early twenty-first century but had largely been employed behind the scenes at financial institutions. With the advent of the more sophisticated internet, smartphones and data encryption, consumer-level fintech has now become a regular part of our daily lives.

A Fast-Growing Industry

Given that fintech is oriented toward developing in-demand solutions to improve our financial lives, it should be no surprise that the sector is developing rapidly. Global fintech funding in 2021 reached a record $132 billion, representing one of every five venture-capital dollars. In the United States, funding last year hit $63 billion—almost half the worldwide total—across 1,827 deals. This trend seems certain to continue throughout 2022.

Women at the Core of the Fintech Future

Despite fintech’s immense growth, the needs and desires of women in the industry have largely been overlooked. Historically, it has been male-dominated and hasn’t addressed issues of financial independence for women, underserving female-founded businesses and leaving most women unsatisfied with their financial services. Studies show that worldwide, more than one billion women lack access to financial services such as checking accounts, insurance and loans. The benefits of innovations such as cryptocurrency to give women who are currently unable to protect their money and face significant difficulties engaging in business would be tremendous.

At the other end of the spectrum, ignoring women who are already major players in the business world is losing the financial-services sector serious money. It’s undeniable that women bring value to businesses. Research and analysis by the Harvard Business Review, using data from Dow Jones and from the U.S. Census Bureau, shows that female-owned firms generate higher revenue, provide greater investor returns and ultimately create more jobs than male-owned firms. From 1997 through 2014, businesses owned by women saw a 72.3% revenue growth, whereas male-owned businesses only grew by 45.1% during the same period. Women-owned firms created 1.24 million more jobs during the eight-year span between 2007 to 2015 than male-owned businesses. And companies with at least one female founder performed 63% better than companies with all-male founders in terms of return on investment as shown by investment data gathered from 2005 through 2015. Women accomplished all of this despite the fact that, according to U.S. Census Bureau data, more than 75% of businesses are male-owned.

Thus, although men may be starting and running more businesses, women have shown that they are more effective business leaders. Nonetheless, women on average received smaller business loans than men. Studies recently covered by business news outlets like Forbes and CNBC report that the average sized loan for women-owned businesses was 31% less than for male-owned businesses, and that women receive more costly debt than male borrowers. Female entrepreneurs report facing significant difficulties obtaining business financing, feeling that their ideas are subject to greater scrutiny than those of male business owners. For example, research by HSBC Private Banking surveying over 1,200 entrepreneurs found that 46% of American entrepreneurs reported experiencing gender bias when trying to raise capital. Statistics also show that businesswomen are more likely than men to turn to their credit cards to fund their operations—possibly a sign of the difficulties they face when seeking funding.

Despite all this, gender equality in business leadership is improving, and fintech is no exception. Increasingly, the roles of global business development leadership for major banks, CEOs and founders of financial-services companies, general counsels of fintech businesses and heads of financial product development groups are being filled by women. Roughly one in five fintech executives is female, and more than a third of businesses globally are owned or operated by women. They’re all calling for the same thing: better services for women seeking to achieve their financial dreams and financial independence.

Billions in revenue worldwide are available from improving women’s access to fintech, which requires a better understanding of their need for financial products and services. Businesswomen and female entrepreneurs frequently complain that biases in favor of men in careers, lending and wealth and asset management mean that services that may seem gender-neutral are anything but. As Louise Brett, Head of UK FinTech for Deloitte recently wrote, “enlightened companies are waking up to the power of the female purse,” but fintech may be lagging behind in this area. Increased flexibility and a focus on women’s financial-services needs can close this gap, and women leaders in fintech are focused on taking advantage of the underserved areas of this market to continue its unprecedented growth.

Making Their Voices Heard

On the legal-services side, key fintech topics include the need for help navigating regulations that affect women’s ability to innovate new forms of technology and assets, and for help raising women’s voices in the creation of new such regulations. The pace of fintech development has made clear that it’s essential to quickly adapt for this new world regulations that have always focused on traditional financial institutions.

This requires meaningful collaboration with governments, regulators, industry leaders and other groups developing new laws, policies and regulations and creating new compliance procedures. Dependable technology lawyers need to help their clients find and take advantage of opportunities to have input into proposed fintech regulations, in which female entrepreneurs are concerned about protecting both their businesses and their customers from bad actors and fraud in the fintech market.

Women are still a minority in fintech, but they have important concerns and perspectives that must be heard. Technology lawyers are likely to find their own success will be boosted by helping these industry innovators navigate and adapt, lifting one another to the heights of professional and personal achievement.

Rachel Sifuentes is an associate at Riley Safer Holmes & Cancila. Clients in high-stakes consumer protection, class action and other complex commercial litigation matters, or those facing investigation by government agencies and regulators, consistently turn to Rachel to resolve their cases, often before they start.

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