Diversity in Fintech: A 15 to 35% Boost In Performance?
Recent studies have highlighted how male-dominated FinTech boards are, with some studies finding that as much as 69% of FinTech firms’ boards are entirely male. These findings coupled with a significant amount of research suggesting a lack of racial and gender diversity at Board level in Technology and Finance should create a cause for concern among FinTech companies.
Although we do not have an abundance of diversity metrics for FinTech, initiatives like ‘The Tech Inclusion Pledge’ (that aims to increase diversity and inclusion in the technical workforce) has commissioned research that found African Americans lead just 1% of VC-backed startups, and 88% of IT patents have male-only invention teams.
FinTech is inherently diverse as it is the combination of technology and finance to enable a high level of innovation and disruption of existing markets. However, FinTech businesses need to embed and promote diversity in their culture as they grow, or risk losing some of the essence of what has made them successful to date.
Gender & Ethnicity
When discussing diversity it is often in reference to gender and ethnicity, two of the most important diversity considerations firms make. The common talent pool for FinTech draws from Finance and Technology, themselves two male-dominant industries with a lack of female representation at a senior level.
McKinsey found that gender diverse firms outperformed by 15% and ethnically diverse firms by 35% when compared to non-diverse organisations. The potential value, therefore, of differing perspectives and experiences that could be brought by exceptional female or ethnically diverse talent to FinTech businesses is significant.
Diversity Should Also Include Background and Experience
Gender and ethnicity are just two ways in which FinTech firms can increase diversity as they grow. The industries from which Fintech firms typically hire from are another important diversity factor to consider.
FinTech firms should look to strike a balance between hiring people from technology backgrounds, financial services backgrounds and other industry backgrounds. Focusing solely on the Finance and Technology industries when hiring restricts both the likelihood of finding diverse ‘A players’ (due to the size of the talent pools) and ignores the high-quality potential talent that can be found elsewhere.
There are hard skills that only the Finance and Technology industries can provide, but the skills which many FinTech firms value, such as being entrepreneurial, analytical, energetic, driven and growth focussed can be found across multiple industries, where alternative perspectives can add great value. A recent article by the TechGrowth team at KPMG cited that experience is a diversity metric we hear less about, but it plays a crucial role in keeping firms on the right trajectory and innovative.
Cultural Diversity And The Mistake Many FinTech Businesses Make
A number of FinTech firms pride themselves on their corporate cultures, and it is crucial that as they grow these cultures are maintained. A recent article by the FRC found that successful Boards embody the desired culture of the firm. However, FinTech firms often look to hire senior or Board level candidates from large, global, financial services institutions which have vastly different corporate cultures and ethos’ compared to FinTech start-ups. These individuals can add considerable value, but the assessment of that individual’s alignment with the firm’s culture and direction is critical.
Again there is a balance to be struck between bringing in additive corporate cultures and skill sets while remaining aware of the effect this can have on the existing culture.
Diversity, rightly, has the attention of many boards given the numerous research studies that have demonstrated the performance advantages that diverse culture brings. Few industries have bigger opportunities in this regard than FinTech.
Achieving diversity through gender, ethnicity, industry backgrounds or experience, can help FinTech companies to build out high calibre, diverse and talented teams. Initiatives like The Tech Inclusion Pledge are an important first step FinTech businesses are making towards actively championing diversity, but perhaps the bigger change is the necessary shift in mentality these companies need to make to look outside of traditional talent pools and beyond gender and ethnicity when building diverse teams.
From an executive search perspective, this is where I see businesses like ours adding the most value to FinTech companies. With a high percentage of diverse placements, and business units and talent pools covering multiple industries and functions, we can think creatively about where we source talent from and seek to identify value add skill sets from a broad pool of candidates across industries, genders, ethnicities, corporate cultures and backgrounds.