Women In Fintech Will Play A Crucial Part In The Covid-19 Recovery Plan

The coronavirus has prompted the U.K.’s biggest government bailout of all time. The bill for subsidies and tax breaks for businesses impacted by Covid-19 has already reached more than £100 billion and will continue to increase.

This has prompted concern among some that rescue money is being wasted or exploited by companies that can withstand the pressure of the unprecedented crisis – while the most vulnerable entrepreneurs across the country, especially in highly innovative sectors such as fintech, are not getting an equal level of support.

Of particular concern is the impact on female-led fintech businesses. Women consistently find it harder to access finance than their male peers when trying to scale their companies, encouraging them to become inherently more resilient. However, the coronavirus crisis could also make matters worse, especially for female founders in this predominantly male fintech space.

According to Innovate Finance’s 2019 Venture Capital Investment Report, female founders make up just 17 percent of fintech companies and women receive only three percent of VC fintech funding.

This discrimination is counterproductive. Companies with diverse staff need to be valued even more during times of uncertainty when adjusting processes and implementing a recovery plan and especially when women are known to excel in creativity around change. 

According to Harvard Business Review, women are resilient, results driven and better prepared leaders in the face of adversity - so why aren’t we doing more to support them? 

How groundbreaking is the fintech industry?

Dr. Ruth Wandhöfer, Partner, Gauss Ventures, recently stated in a Business Cloud article that: “Paradoxically, there is currently a $300 billion annual credit deficit in funding for small businesses owned by women, which is expected to grow due to the economic fallout caused by Covid-19.”

She goes on to say that the fintech industry, “famed for adjective overkill like ‘disruptive’, ‘innovative’ and ‘groundbreaking’, trails behind when it comes to “a) delivering gender equality within the workforce; and b) identifying the business value of female-led entrepreneurship.” Is the fintech industry delivering gender equality and identifying the value of women?

As Dr. Wandhöfer points out, a LendIt survey found that only 37 percent of fintech workers are women, and just 19 percent are at C-suite level. Alongside this, All Raise reported that just seven percent of all VC deals in fintech during 2019 had a female CEO.

In conversation, Dr. Wandhöfer explores how fintech funding has been challenged since the outbreak with fintech deals having the worst Q1 since 2016 and the worst funding Q1 since 2017.

“Not only has it been difficult to close planned rounds, but also initially established valuations have seen, sometimes significant, downward adjustments. Female-led fintechs are already a rarity that needs protecting. This crisis shows that there is still no equality when it comes to treatment around financing and it is now more urgent than ever to ensure that entrepreneurs in general are treated equally.”

Reiterating that women are underrepresented in the VC community, a significant part of the fintech ecosystem, she adds that “diversity certainly makes this business more creative and versatile, bringing a different perspective to assessing opportunities, including identifying female fintech leadership in the market. It is a virtuous cycle."

Angelica Krystle Donati –an advisory partner at Concrete, a London-based VC firm, also believes that more diversity within the VC community can bring new perspective and understanding about the challenges that women led businesses face, such as juggling family life, especially during a time of crisis.

“Women and minority-led firms are often smaller in size and therefore have less established banking relationships and are therefore less creditworthy. Women, who bear the brunt of childcare responsibilities, have had to compromise.”

Donati remains optimistic and believes that technology has provided the blueprint for how we can promote greater flexibility and support for female entrepreneurs running fintech businesses. Forcing everyone to work from home -and seeing that people can continue to work effectively, is changing perspectives that can be beneficial to founders that would otherwise be overlooked for funding.

“Tech is the clear winner in this pandemic. The pandemic will engender long-term changes to the ways we live and work. Technology is playing an important role in our lives, given that if we didn’t have the option to log in and work remotely, we would be in serious trouble right now. More importantly, it’s allowing us to rethink and digitalize entire processes.”

Supporting the early stage startup ecosystem

I also spoke with leading women in fintech to gage the impact of coronavirus on their businesses and whether they have had similar experiences with VC funding. Sylvia Carrasco, CEO and Founder of Goldex, reveals that as a startup, they were not eligible for the U.K. government’s programs like the Coronavirus Business Interruption Loan Scheme (CBILS) or the Bounce Back Loan (BBL). 

“Established businesses generating revenues can get access to grants and loans. But what do you do with startups where revenues are not the main metric and they are generally still profit losers?” Carrasco explains that the 700,000 startups were founded in the U.K. in 2019, so “not helping the startup community will have tremendous consequences at employment level.”

She adds that the coronavirus Future Fund is a step in the right direction, but “the overall feeling within the startup community is that it will not really help the early stage companies. Why? Because early startups raise money from friends and family (angels), who in turn are incentivized by being able to claim a percentage of their investment back via HMRC’s SEIS/EIS schemes.

“Since the Future Fund is not adding those schemes into the mix, it looks like only startups that have raised money (or have the potential to raise money) from VCs will benefit from it. I believe that the organizations favored by the Future Fund are the more mature startups and of course, those VCs who are now in an even better position as they share 50 percent of their investment risk with the Government.”

Caroline Plumb, Founder and CEO of Fluidly, echoes this sentiment and says that while she is aware of the disproportionate amount of funding that is driven into women-led businesses, “so many of the support schemes – like the Future Fund – might well entrench this inequality as they use previous backing as eligibility criteria.”

Again, here we see an issue with larger businesses being given preferential treatment and an example of a female-led business struggling to receive funding in order to keep her organization afloat. However, once diversity is valued, could women in fintech play a crucial part in the Covid-19 recovery plan, putting in place a blueprint that others in the financial services sector and other industries could follow.

Women in fintech and the Covid-19 recovery plan

Catherine Wines, Co-Founder of WorldRemit, believes that “there is no doubt that women have had to develop resilience in order to achieve their goals. They generally have to work twice as hard to obtain recognition and often face numerous rejections when trying to get funding for their business. This resilience gives them the added edge needed in time of crisis.”

Whether women excel over men in creativity may be challenged, but a more balanced view is an advantage to business. “Fintech has led the technology revolution and it is certainly true that many businesses have shown resilience in the current climate from moving overnight to working remotely to offering online solutions to both business customers and consumers,” Wines continues.

Resilience was key when shifting from the office to working from home and Liza Russell, CEO of Inbotiqa, says how “as a leader of a small business during Covid-19, I realise how ahead of the curve we were with good remote working practices in place.”

With work-life balance and flexibility now a more outspoken priority, Russell adds that because of the creativity of women “it’s important that we are invited into the board rooms when future strategies are being discussed in the recovery phase.” She goes on to say that the recovery plan will change how we work today, resulting in the commercial property market suffering as companies are able to communicate efficiently remotely.

“A 9 to 5 working day co-located with several hundred other employees is not necessary to be successful. Women are resilient and more receptive to change, we often multi-skill while managing work, home and families so are well-placed to implement the necessary changes to working practices,” Russell says.

Plumb agrees and says that “women are key consumers, decision-makers on a majority of household consumption and of course, half the population so they of course are a critical part of the Covid recovery phase.” Carrasco affirms this point further. “Women will play a crucial part during the recovery phase because we make up 50 percent of the U.K. population. That statistic alone should be suffice to understand that women will be part of it.”

As mentioned above, when questioning whether women are better equipped to navigate during challenging times than men, she also says that while “women are still at a disadvantage in comparison to their male counterparts,” “the fact that women have to work harder, learn faster and adapt quicker to arrive at the same place as their men colleagues is something that is not alien to us.

“I guess we are used to not having it easy and that is something engrained in most women’s DNA,” Carrasco states. “Fintech has historically led the way in innovation, which will be a key ingredient in the post-Covid recovery. As lockdown looks set to stay in place for a lot of us for the foreseeable future, fintech companies will be necessary as we adapt to what has been called the ‘new normal’.”