New research exploring the ethnic diversity of UK fintech’s workforce, produced by Tech Nation’s Fintech Delivery Panel (FDP) with the support of GoCardless and Fintrail, has initiated important conversations on the targeted action needed across fintech companies and the sector as a whole.
The Ethnic Diversity in UK Fintech report indicated that while the participation in UK fintech of individuals from underrepresented backgrounds has increased from 12% in 2011 to 20% in 2021, this has not been identical across different communities. The number of individuals from an Asian background has increased from 7.5% to 12.2%, but the proportion of Black people working in fintech has remained static, at 3.1%.
Commenting in the report, Genevieve Leveille, founder and CEO of AgriLedger, highlighted the role of socioeconomic and cultural factors which are hard to capture in quantitative data but may be presenting barriers for Black people entering and progressing in the fintech sector. She highlighted differences in aspirations and expectations between different immigrant communities depending on their cultural background and reasons for migrating.
At a report launch event, Genevieve also pointed out that as a relatively new industry, a career in fintech may not be a viable or attractive option for people who don’t have the financial security or stability to accept job security risks or low salaries that can often come with working in an early-stage tech startup.
This view is also expressed by Liam Gray, strategic account manager at Plaid, who shared his perspective in the report.
He said: “[F]or successful black people in the legal or finance sphere, in particular, if you are on track to be a partner or MD at a law firm or bank, moving into fintech is a huge risk.
“Some will argue this is the case for anyone, but for black people, who are already statistically less likely to make it into those positions, the risk often feels far greater.”
Even for those who do work in fintech, cultural differences can still present stumbling blocks to career progression.
Genevieve explained: “I cannot put a number on [ethnic minority employees] who would come from an affluent background or not, but the reality is that many will come from a different cultural background and not be versed in what could be considered norms in some circles.
“As a result they may be labelled as either angry or worse inadequate as they are not able to assimilate to the environment. Knowing how to play the game is key to survival and more importantly progression.”
In line with this, a previous report by Cornerstone Partners, Engage Inclusivity and Diversity VC found that 75% of UK founders receiving venture capital funding were from advantaged socioeconomic backgrounds.
The new FDP research, which used public employee information on professional network platforms like LinkedIn, is intended as a first step towards understanding ethnic diversity representation at an employee level in UK fintech, in order to facilitate not only further research and benchmarking, but targeted action.
Ahmed Badr, chief legal and risk officer at GoCardless and co-chair of the Fintech Delivery Panel’s Diversity working group, acknowledged the limitations in the research method but stressed the importance of building a data foundation.
He commented: “In order to move the needle on diversity in our industry, we need coordinated action. For that action to be most effective, and to achieve the outcome of better participation from underrepresented groups, it needs to be targeted. For it to be targeted, we need to better understand the current make-up of the fintech workforce.
“We didn’t want to let ‘perfect’ stand in the way of building this data foundation, so what we present here contributes to the baseline. Whilst I’m fascinated by the results, I’m most excited about the opportunities the ensuing discussion will bring for collective, impactful action.”
To support companies collecting ethnic diversity data directly from employees – giving them an opportunity to self-identify – the working group has been running workshops and developing questionnaire tools for fintech companies to use in their D&I strategies.
At GoCardless, 59% of the global workforce responded to a diversity survey, but Ahmed says that getting to a position to collect that data was “not easy”.
A major revelation and discussion point from the research is the fact that ethnic diversity decreases as the stage of fintech company increases; seed-stage companies have around 15% Black, Asian and other ethnic minority group representation, while post-exit companies have 9%.
For some in the fintech sector, this finding was disappointing since later-stage companies should have more budget and resources to pro-actively promote diversity, compared to cash-strapped, early-stage companies.
But other fintech leaders anecdotally shared that this shouldn’t be surprising since professional pressures – including networking with majority-white investors – become more of a priority as a company scales, demanding c-suite employees and board members who can fit into the more traditional financial services and professional services environments.
Harish Pesala, co-founder of fintech Balkerne, explained that it’s much easier to hire diverse ‘generalist problem solvers’ and operational roles than it is to hire diverse employees for senior positions when the company reaches a later stage.
“At seed stages, companies like ours tend to hire generalist problem solvers and applicants are likely to have a technology background, this attracts a diverse pool of young candidates,” he said. “At later stages, we’re looking for individuals with a proven track record in the sector. In insurance, we found that senior advisors and board members are most likely to be men of white ethnicity. We didn’t find many women or individuals from more diverse backgrounds in top positions.
“In the insurance industry, I didn’t find individuals from a diverse background in core functions such as underwriting, broking or management functions. I found individuals from ethnic minorities to work in supporting functions such as IT and customer services.
“In order to do well in B2B ‘head of growth’ or management functions, you need to have the right network, play golf and be in between the right communities.”
With this problem in mind, financial crime consultancy Fintrail has partnered with ACAMS to offer 30 fully paid scholarships to talented individuals from Black, Asian and other ethnic minority backgrounds to complete the Certified AML FinTech Compliance Associate (CAFCA) qualification.
“We recognise that not having Anti-Money Laundering qualifications can be a barrier to entry to a wonderfully rewarding career in anti-financial crime, and that these barriers are even higher for BIPOC and BAME individuals due to the systemic racism we continue to see in society,” Fintrail co-founder Gemma Rogers wrote in a report case study.
“As such, our partnership to offer 30 full scholarships is a small way to try to address these inequalities in the industry. We know it won’t solve the problems entirely, but we are keen to take some action to redress the balance”
Another key finding showed that the proportion of ethnic minority representation drops as seniority of job role increases, raising concerns around potential barriers to better representation at a senior leadership level. This mirrors other research conducted in early 2020 of eight leading fintechs which revealed that only 9% of directors were from an ethnic minority background.
Overall, the research adds granular, employee-level information to ongoing research highlighting the disparity in tech, including the fact that only 1.75% of capital across all funding stages went to entrepreneurs from Black, Asian or other ethnic minority communities,
Clearly, progress is needed to create an inclusive environment where fintech is actively encouraging diverse founders and employees across its workforce, retaining diverse talent, and providing role models in senior leadership to inspire a more diverse future.
Co-chair of FDP’s Diversity working group, Martin Ijaha, said: “Financial inclusion is a theme that has driven many of our most successful fintech’s across the UK, with innovations that have improved the lives of customers and increased financial inclusion across our society.
“Building on this position and improving representation across the UK fintech work force will only accelerate this impact.”