Ecosystem Players’ Perspectives on Fintech Becoming Gender Intelligent

Saturday 28th November 2020

The Alliance research on How Fintechs Can Profit From The Multi-Trillion Dollar Female Economy, published last month, outlined the key steps to building an ecosystem that enables fintechs to become gender intelligent. Among those steps were creating more awareness about the women’s market opportunity using sex disaggregated data; developing use cases of fintechs that have been successful with thewomen’s market to establish the business case; fostering market entry through hackathons, accelerators, and the like; as well as encouraging investors to develop an investment thesis that integrates the female economy opportunity. We asked three experts to reflect on some of these levers, from their unique perspectives in the fintech ecosystem: an investor, Jorge Farfan, Investment Director at Bamboo Capital Partners, a female fintech founder, Radhika Bhachu, founder of Kenya-based fintech firm Ndovu (and second place winner in the Alliance Hack 2020) and a women’s markets lead at a major financial services provider, Liza Garay-De Vaubernier, Global Head of Women’s Market at AXA.

The need for more awareness using sex disaggregated data

In the Alliance’s survey, 64 percent of fintechs that collect sex-disaggregated customer data found that female customers had similar or higher usage rates than men. The majority also found similar or higher lifetime values (LTV) and lower customer acquisition costs (CAC) for female customers. Why, then, are women customers widely undervalued by the sector? One major reason is that sex-disaggregated data often goes unused. While 80 percent of fintechs in the study can identify consumers by sex (far higher than in the incumbent financial services sector), most do not integrate sex-disaggregated data to inform decisions at any stage in the business lifecycle.

This problem begins early on in the business development, with fintechs not breaking down their Total Available Market by sex. This is then coupled with a tendency to rely on assumptions about consumer behavior—like the misguided notion that men are early adopters of tech—driven by the desire to grow the user base as quickly as possible and capture investor interest. Products and services are then designed with an archetypal male in mind, reflecting skews in market research. In our study, we found that just 11 percent of B2C fintechs surveyed use sex as a criterion to segment their market. By the time most fintechs reach maturity, they are well on their way to becoming caught in a self-reinforcing loop of catering primarily to male users. Clearly there is a need to raise awareness about the use of sex-dissaggregated data, just as the Alliance has done with its partners  in the incumbent space.

Expand the know-how on being gender intelligent—building use cases

For consumers, the promise of solving for specific life moments has never been more real, with the emergence of Open Banking and the possibility of integrating many suppliers to offer a one-stop-solution for lifecycle needs such as housing, starting families, starting and growing a business, caring for your health, investing for the future. Fintechs are busy adding value by integrating non-financial services to their financial services offer. Indeed, our research found that 75 percent of fintechs responding to the survey had integrated some form of non-financial services—such as financial or business education, financial management, networking and/or mentoring—into their offerings. Ndovu, which offers responsible investment products to underinvested Kenyan women, is a perfect example. Through market research, Radhika found that many respondents said that they would love to invest but felt they need education and advice to get started. To shift their behavior and lead them to invest smartly, Ndovu provides ‘snackable content’ to users throughout their investment journeys based on a series of questions and risk appetite assessments, so that the information is personalized and easy to digest. The app also ‘gamifies’ financial education with short quizzes, so that the users can track their own learning. “So it’s not just providing information, it’s making sure they are tested,” said Radhika.

Jorge likened the opportunity to add value to women right now through FinTech, EdTech and FemTech, to the beginning of the microfinance movement, when the financial sector figured out how to lend and get paid back without collateral, enabling it to reach millions of unbanked women. He shared how some of his investee firms are integrating financial education into their offerings, and how this is improving customer acquisition and usage rates. Liza concurred, citing research AXA commissioned which found that female entrepreneurs would prefer AXA to provide mentoring and network building opportunities as opposed to a single injection of funds. Thus, the consensus across our experts is that creating great solutions involves collaboration and partnership across digital banks, FinTechs, EdTechs, FemTechs, eCommerce platforms, among others.

Aligning Investors

Fintechs would almost certainly pay more attention to the women’s market earlier on, when it’s easier to course correct, if investors had an “investment thesis” showing the scale of the opportunity and encouraged fintechs to cater equally to both sexes. Investing in fintechs with female founders is also critical. Nearly two-thirds of the women-focused fintechs—defined as those with 75%+ female customers (and which happened to also be more likely to have been founded primarily by women)—reported that fundraising and investor bias were their biggest business challenges. Only half of the venture capitalists (VCs) surveyed for our report (representing all funding stages, from seed stage to beyond Series D) were aware that men and women differed on access and use of financial services. 

From the investor perspective, Jorge reckoned that this could change if we create awareness in the investment community, encourage investors to give targets and guidelines for investee companies, and align stakeholders throughout the investment pipeline. “There has to be a focus on women across all three levels—investment funds, LPs [limited partnerships], and incubators/accelerators—so that we all have the same theory and approach.” he explained. “We have to persuade more people and also bridge the language gap between what the investors speak, like IRR, and the language of fintechs focused on the female economy.”

Supportive ecosystems

When asked about the role of an ecosystem in fostering female-focused fintechs like her own, Radhika remarked, “one thing that’s definitely missing in the Kenyan context–in order for fintechs to drive the female economy, you need a strategic approach from the government to bring together people like financial regulators, educational institutions, telecoms, and more, to work together to drive meaningful impact.” But, she said, there are positive signs that the country is moving in the right direction. “I think Kenya is working towards that approach— they just created a sandbox where fintechs can apply for room to grow and build their company under the regulators’ eye, so that they have the blessing of the regulator by the time they’re successful,” she said.

It is clear that there are huge opportunities to accelerate fintech’s impact on the female economy including building use cases and aligning key stakeholders. We look forward to building that ecosystem with you.