WORKWEEK

There are about 700 billion reasons why we want gender equity in fintech. 

The annual revenue opportunity left on the table by not serving women with financial services at the same level as men are estimated to be around $700 billion. 

And to put that money into context, it is nearly double the size of Elon Musk’s silly little net worth. 

“I just cannot fathom why this isn’t an opportunity that we’re not grabbing onto with both hands,” says Mary Ellen Iskenderian, President of Women’s World Banking (WWB). 

Same, girl. 

So we talked about actions we can take to double down on this opportunity on the biggest stage in fintech at Money 20/20 with Shivani Siroya, Founder and CEO at Tala.  

There are about 2.5 billion individuals around the world who are currently lacking access to the financial system. 

This means they need access to the right products that make them consumers. 

There’s also a $2.3 trillion credit gap in emerging markets alone. 

They will enter the financial marketplace by providing these untapped markets with the right products and services and supplying them with purchasing power and liquidity. 

In today’s economic climate, this is an opportunity that we cannot afford to miss.

“It makes good business sense for private companies, financial institutions, and governments to think of this as injecting purchasing power into the economy, which will lead to an increase in GDP,” says Shivani. 

It all sounds somewhat simple. 

But financial inclusion isn’t just about providing transactional value for a period of time. 

It’s fundamentally about systemic change and moving the needle on how our financial system works. 

That means rethinking how creditworthiness is determined and how we can show that customers can ladder into additional products over time, increasing their financial agency and confidence.

Systemic change is critical. 

And we’re just getting started, says Mary Ellen. 

“A decade ago when the term financial inclusion became much more the term of art,” she said. 

As the term financial inclusion has become more widely used, it’s important to remember that its impact extends beyond simply increasing access to products and services. 

Only two or three years ago, research showed that financial inclusion is a critical macro factor in reducing income inequality.

The research showed the need to reach out to the most excluded people to change anything around income inequality.

“Then the [International Monetary Fund] decided and made a huge deal about it, that financial inclusion was a critical macro factor, and if you’re going to make a change in your macroeconomy, they started making some very important regulations and recommendations to governments specifically around digital financial services,” says Mary Ellen.  

What matters most is how access to financial resources can impact an individual woman and her family. 

When she has more control over her finances, she is less vulnerable to domestic violence, more likely to vote, and even more likely to stand for office.

They’re all sorts of relational dynamics and power changes that are brought about by literally nothing more than having a safe place to save, a way to transact and save money, reasonably affordably send money, the ability to borrow at non notorious crazy interest rates, and then having insurance that can protect everything that you’ve built.

Inclusion Meets Revenue 

The firms in this sector and their responsibility to advance the progress and the magnitude at which we can address this issue returns to how fintech companies create profit.

The way that a lot of financial services companies generate revenue by extracting it from their customers. That’s the wrong way to go about it. 

If you’re providing a service to someone, you should be doing it in a way that benefits them, not in a way that harms them.

For example, Tala is bringing equity to the credit landscape. The company doesn’t take anything upfront. Instead of the buy now, pay later business model, it is pay-as-you-go credit. 

So you pay for what you need and only pay at the end of the term.

And you choose what terms, rates, and pricing match your income. And Tala guides you along that way. 

As a fintech, it’s crucial to: 

1. Ensure that there are other products beyond credit that the customer can engage with. 
2. Think more sustainably about your business model and say we shouldn’t grow to the extent that we eventually can’t serve the customer anymore.

“That’s what I’ve seen so much in development,” Shivani said. “We come out with these great products, but we cannot sustain ourselves. And then your customer got used to something they now can’t access anymore.”

To Shivani’s point, there needs to be more clarity between thinking that the return on investment and wanting to grow a business is separate from inclusion. 

Capital Disconnect 

Most fintech companies and leaders went into this business because they are mission-driven. 

Mary Ellen says that the mission is how they’ll raise capital. 

“But then somewhere when they get to a point where they’re raising money that they’ve gotta scale the folks who are funding them in that part of their journey almost forced them into abandoning that inclusion mission,” she said. 

Women’s World Banking has been an impact investor for 12 years, but over the last three years, they’ve been actively investing in fintechs. 

Mary Ellen says she’s been very heartened by the later stage rounds they’ve done and how many investors have come along with the same gender goals WWB has. 

The disconnect, however, lies in investors needing to recognize that while diversity is excellent, there’s this vast untapped market base we could be going after and scaling. 

And tapping into that market takes longer. 

So it’s essential to align with that capital provider willing to take that slightly longer route so that you can continue that original inclusion strategy. 

In this chaotic world that we live in, where everything is instant, we tend to apply short-term thinking to everything. 

We want to scale fast. We want to grow fast. We want to impress quickly. So we have to align with investors that have a long path mentality. 

As a founder, Shivani knew she had the right investors at her cap table when they said they couldn’t wait to meet their customers. 

Tala operates across four countries, including Mexico, Kenya, the Philippines, and India – deploying $3.5 billion across these markets in terms of access to credit over the last seven years. 

“We have achieved some scale,” Shivani said. 

“It’s a drop in the bucket in terms of the 2.5 billion people that still need access, but in the beginning, it was marrying those two objectives of saying we are going to scale because this is a massive global problem and we have to think of how we use data and technology with that.”

But then also ensuring that the capital providers we brought to the table – even VCs like Google Ventures, PayPal, and Lowercase Capital – said things to me like ‘I can’t wait until we go visit our customers.'”

The key word is “we.” 

Fintech and financial inclusion are so well aligned. 

Poor people, especially women, have been excluded from the financial system due to legacy issues. Fintechs enable them to bypass these issues and access data. 

In addition, poor people (especially women) cannot use real estate/land as collateral, and in many countries, women cannot inherit in their name. 

Fintechs allow loans based on cash flow rather than collateral, which could revolutionize the industry.

Revolutions come with change. 

So how do we ensure we’re protecting customers and our business models? Let’s dive into that in part 2 of this discussion on Thursday. 

Want to hear this conversation for yourself? Tune in here.