In the wake of the tragic killing of George Floyd at the hands of a Minneapolis police officer, people around the world are showing remarkable support for the cause of African American equality. From every corner of the globe, and in cities and towns across America, people from all walks of life are increasingly committed to making sure that the slogan “Black Lives Matter” evolves from being a mere rallying cry to a new reality for millions of black Americans.
With this in mind, we want to share again our thoughts on ethnic diversity in our industry, fintech, where we are in terms of inclusivity, and where we need to go.
When the discussion of diversity in the tech world comes up, the conversation is typically oriented around gender diversity. But the call for greater inclusion in the tech world is not limited to gender; diversity along ethnic lines is also a goal that technology companies have increasingly begun to strive toward.
Perhaps the international nature of many technology enterprises, with tech entrepreneurs and tech talent truly arriving in Silicon Valley from all corners of the globe, serves to mask the relatively small number of tech firms in general, and fintech firms, in specific, that are run by Americans who are ethnic minorities. Indeed, an online search for “African Americans in fintech,” for example, is almost as likely to produce entrepreneurs from Nairobi, Kenya as from Newark, New Jersey.
Importantly, there are tech firms that have won admiration for the diversity of their teams. Slack, for example, was widely praised for its diversity report which, released in 2017, showed that the company had achieved better gender diversity than its Silicon Valley peers. The report also revealed that Slack’s workforce had as much as 3x the number of underrepresented minorities (African American, Latino/Hispanic, and Native American) as its peers. An Atlantic article from 2018 pointed out that where Slack had minorities in 13% of all technical positions and 6% in leadership positions, companies like Google and Facebook had less than 4% of their technical positions filled by underrepresented minorities.
How has fintech fared when it comes to ethnic diversity in its technical and leadership ranks? Finovate has hosted a handful of fintech companies with African American leadership over the years – Clinc and its CEO and co-founder Jason Mars, DarcMatter and its COO and co-founder Natasha Bansgopaul, are two that come to mind. And the industry writ large may have more founders of color than many think: Forbes celebrated the release of its Forbes Fintech 50 roster last year by featuring Ryan Williams, the young, African American CEO of mortgagetech firm Cadre on the magazine’s cover. And venture capital firms like Backstage Capital have made investment in startups with founders of color – as well as women and members of the LGBT community – a priority.
Nevertheless, even as the number of African American and Latino/Hispanic tech founders and leaders has grown, 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.
One of the biggest problems that companies lacking in diversity can face is that it can make them less capable of responding to the needs of diverse markets. Fintech analyst Mary Wisniewski wondered in a 2018 American Banker article “Are black millennials a blind spot for fintech firms?” and noted that while millennials in general have developed a healthy skepticism toward banks, this wariness is all the more pronounced in young people from communities of color. Among the solutions offered are more minority-owned financial institutions, and an increased emphasis on financial literacy and wellness as an engagement strategy for younger minorities.
In this regard, fintechs like GRIND may become more well-known and popular. Launched last year and based in South Central Los Angeles where it caters to the local African American community, GRIND offers FDIC-insured debit accounts, a mobile banking app, and the ability to get paid two days earlier if they set up direct deposit with GRIND. Another example of this kind of company is Finhabits, a bilingual (Spanish/English) mobile investment platform launched by Carlos Garcia in 2015. Garcia, an MIT graduate with experience with Merrill Lynch and Galileo Investment Management, explained that the issue for Latino and Hispanic communities was not their ability to save, but their lack of familiarity with investing. “Our day-to-day money management is good, but planning for 15 years ahead is not” he said in a 2017 profile.
As fintech continues to diversify itself as an industry, one good note is that it appears that fintech may be helping alleviate some of the issues in financial services caused, in part, by a lack of diversity. A recent report from the FDIC on consumer-lending discrimination in the fintech era, for example, suggested that technology may be playing a positive role in reducing the discrimination in credit faced by Latino/Hispanic and African-American consumers in particular. The report specifically pointed to “new entry of fintech platforms” as well as digital improvements by incumbents for increasing competition and declining rate discrimination.