Diverse fintech founders are transforming the landscape

An explo­sion of inter­sec­tion­al entre­pre­neurs has led the way in bridg­ing eco­nom­ic jus­tice and inter­con­nec­tiv­i­ty. Where main­stream fin­techs focus on mass mar­kets, diverse fin­techs are unlock­ing the finan­cial poten­tial of under­served com­mu­ni­ties.

Coro­n­avirus has shaped the way we inter­act, con­sume and act, inevitably chang­ing the way we approach prob­lems and build solu­tions. All across the world, a sense of col­lec­tive com­mu­ni­ty has been brought to the fore­front to estab­lish finan­cial solu­tions.

Digital payments are here to stay

As the world went into lock­down, the impact of COVID-19 accel­er­at­ed the shift to dig­i­tal pay­ments as many moved online. While Europe leads the cash­less cru­sade, coun­tries across the glob­al south have faced a cri­sis with economies depen­dent on cash.

Turkey has seen an expo­nen­tial uptake in cryp­tocur­ren­cy adop­tion, as the Turk­ish lira con­tin­ues to plum­met against the dol­lar. Such finan­cial insta­bil­i­ty in tra­di­tion­al finance has left a wealth of oppor­tu­ni­ty for com­mu­ni­ties who may have once lacked expo­sure to alter­na­tive finance.

Daniel Ahmed, Co-founder of Fas­set, an eth­i­cal finance plat­form con­nect­ing the real and dig­i­tal econ­o­my through the tokeni­sa­tion of sus­tain­able assets explains, “Peo­ple in the MENA region lack eth­i­cal invest­ment options. As cryp­to becomes a more viable and lucra­tive form of invest­ment, demys­ti­fy­ing and democ­ra­tis­ing access to this emerg­ing asset class becomes ever more impor­tant.”

To date, Fas­set has gar­nered wide trac­tion across the region with over 15,000 sign-ups to the plat­form since its launch in ear­ly Novem­ber, as it con­tin­ues to have tan­gi­ble impact on often over­looked diverse mar­kets.

Financial inclusion key to financial freedom

Finan­cial lit­er­a­cy has helped to break down bar­ri­ers, pro­vid­ing aware­ness around com­mon finan­cial mis­con­cep­tions. Diver­si­ty in fin­tech is build­ing a path to finan­cial free­dom for inter­sec­tion­al com­mu­ni­ties.

Oraan, the first female-led fin­tech in Pak­istan, offers peo­ple a chance to devel­op their finan­cial prowess dig­i­tal­ly through group sav­ings, a long-stand­ing finan­cial tool in devel­op­ing coun­tries. By cre­at­ing dig­i­tal sav­ings groups, known as com­mit­tees, Oraan has brought the secu­ri­ty of an estab­lished finan­cial tool into the dig­i­tal era.

Founder and chief exec­u­tive Hal­i­ma Iqbal explains: “We built a plat­form where women can par­tic­i­pate with­in the finan­cial sys­tem and feel val­i­dat­ed; by hav­ing their own finan­cial iden­ti­ty, they can ben­e­fit from the for­mal econ­o­my.”

With more than 150,000 down­loads and 85 per cent of their 10,000 reser­va­tions attrib­uted to women, Oraan has tapped into a core under­served mar­ket, pro­vid­ing more finan­cial equal­i­ty with­in the Pak­istani econ­o­my. In a coun­try where women make up 48 per cent of the pop­u­la­tion, yet only 6.3 per cent are includ­ed in the for­mal econ­o­my, this is a sig­nif­i­cant achieve­ment.

Access to addi­tion­al income has helped to secure mon­u­men­tal mile­stones for female users. Iqbal says: “Women are com­ing to Oraan with their per­son­al issues too. Dig­i­tal com­mit­tees have helped women to con­tribute to their house­holds, as well as finance more per­son­al issues such as IVF treat­ment.”

Oraan has opened chan­nels for women to talk about their finan­cial goals and what it means to them through online com­mu­ni­ties, in turn build­ing more trust with­in the com­mu­ni­ty and in the prod­uct too.

The Pak­istani female fin­tech isn’t alone in cre­at­ing tan­gi­ble solu­tions in South Asia. Thasli­ma Begum, chief exec­u­tive of TEEK TAKA, a trade finance plat­form work­ing to improve labour con­di­tions in the glob­al fash­ion indus­try, believes there’s poten­tial for fin­tech to go fur­ther. “While dig­i­tal pay­ment sys­tems are a great aid, we need to address the under­ly­ing flaws of our finan­cial sys­tem,” she says.

Ini­tial­ly focus­ing on Bangladesh, the world’s sec­ond-largest cloth­ing man­u­fac­tur­er, TEEK TAKA is cur­rent­ly sup­port­ing fac­to­ries hit by the pan­dem­ic with their financ­ing needs. Fol­low­ing order can­cel­la­tions of more than £1.6 bil­lion, such finan­cial impli­ca­tions have left thou­sands of fac­to­ries and the 4.2 mil­lion gar­ment work­ers in a pre­car­i­ous sit­u­a­tion.

“The cur­rent fin­tech land­scape is dom­i­nat­ed by prod­ucts that serve busi­ness inter­ests and the wealthy, while world­wide, peo­ple are expe­ri­enc­ing grow­ing inequal­i­ty.”

Why representation matters in fintech

Although these diverse fin­techs are help­ing peo­ple on the ground just like them, it doesn’t come with­out strug­gles for their founders. Accord­ing to Atomico’s 2019 The State of Euro­pean Tech report, only 4 per cent of founders in Europe were of Asian back­ground, while 0.9 per cent were from a Black-African or Caribbean back­ground.

Alarm­ing­ly, only 38 Black entre­pre­neurs received ven­ture cap­i­tal fund­ing in the last decade, with Black female entre­pre­neurs being hit the hard­est, gain­ing only 0.02 per cent of the total cap­i­tal invest­ed. It is evi­dent there are high­er bar­ri­ers to entry for diverse founders.

Ezechi Brit­ton, a fin­tech founder turned ven­ture cap­i­tal­ist (VC) at Impact X, believes the dis­par­i­ty of oppor­tu­ni­ties with­in our sys­tems makes it more dif­fi­cult for diverse founders to leapfrog into the indus­try, as they don’t have the same sup­port­ive infra­struc­ture as more priv­i­leged indi­vid­u­als.

In a recent report by the British Busi­ness Bank, the Future Fund high­light­ed that for every £1 of VC invest­ment in the UK, less than 1p is allo­cat­ed to an all-female founder team. A deep­er look into sta­tis­tics pro­vid­ed by the UK gov­ern­ment reveals the data only applies to senior man­age­ment teams, skew­ing the sta­tis­tics to por­tray a more inclu­sive out­look. Just 12 BAME (Black, Asian and minor­i­ty eth­nic) star­tups gained finan­cial sup­port.

Fur­ther­more, the report says VCs are more like­ly to use their net­works to source invest­ments. As such, these bar­ri­ers can only strength­en class, eth­nic and gen­der divides.

How­ev­er, there has been an accel­er­at­ed push towards chang­ing this from the top. Brit­ton expands: “We’re see­ing more diverse VCs try­ing to solve this prob­lem, through tar­get­ed funds. Good Soil, 10x10 and Ada Ven­tures are all work­ing towards increas­ing rep­re­sen­ta­tion. At Impact X, we’re build­ing a £100m fund, which we are cur­rent­ly rais­ing and will deploy over the next 4 years.”

Tra­di­tion­al­ly, reg­u­la­to­ry bod­ies have posed chal­lenges for founders, now how­ev­er they are look­ing towards bet­ter­ing their rela­tion­ships with star­tups around the world. The Finan­cial Con­duct Author­i­ty has pro­vid­ed solu­tions for fin­techs to tri­al their prod­ucts by obtain­ing a dig­i­tal sand­box licence, while reg­u­la­to­ry bod­ies in emerg­ing mar­kets are open to lis­ten­ing and adapt­ing to meet the needs of con­sumers.

What does the future hold for diversity in fintech?

The expe­ri­ences of diverse founders are shap­ing the way in which gov­ern­ments, reg­u­la­to­ry bod­ies and investors are util­is­ing their core skillset to tap into over­looked demo­graph­ics. Diver­si­ty in fin­tech has led to mass inno­va­tion, solv­ing deep-root­ed prob­lems expe­ri­enced by under­served com­mu­ni­ties.

By pro­mot­ing finan­cial inclu­sion through tai­lor-made prod­ucts, cre­at­ed by those with real knowl­edge of the lived expe­ri­ences of these indi­vid­u­als, under­served com­mu­ni­ties can now access a finan­cial sys­tem, where diverse fin­techs are able to give them the reas­sur­ance and under­stand­ing that their voice mat­ters too.