07 March 2023 |

Embedded Finance Can Bring Women Into Fintech


Embedded finance allows female entrepreneurs without backgrounds in Wall Street or Silicon Valley to break into fintech, creating a new wave of founders who may have previously felt excluded from finance and technology. 

Fintech has the potential to provide access to financial services to a broader range of people than ever before, yet sadly, the industry still needs to improve in diverse perspectives. 

Women represent 30% of the workforce and 12% of founders, according to research by FT Partners. Additionally, all-female founding teams garnered 1.9% of venture capital funding in 2022, a decrease from 2.4% in 2021, according to PitchBook data.

To improve these figures, venture capitalists need to diversify the industries where they look for startup founders, and entrepreneurs need to explore opportunities to innovate outdated industries and break into the male-dominated world of finance technology.

Fintech investor Katie Palencsar was 29 years old when she first met a tech company’s female founder for the first time. It was also the first time in her life she realized she, too, could be a female founder. 

“I was like, ‘oh, wow, I can do something like this,'” she said. “That introduced me to the whole world of raising money. I quickly realized what a journey it was and how difficult it was.”

After starting a company, selling it, and working for the acquiring company, she found herself at Anthemis Group, a female-founded and led venture capital firm focused on investing in fintech solutions. 

In 2021, Anthemis Group raised over $700 million to invest in pre-seed through Series B embedded finance startups and early-stage fintechs. Palencsar said the firm had seen more than 2,000 female fintech founders that come from all types of different backgrounds. 

Beyond Traditional

Venture capitalists have long overlooked women and diverse founders due to the social and racial homogeneity of the industry, perpetuating a cycle of male founders receiving the most funding.

Palencsar, managing director at Anthemis Group, said embedded finance unlocked a cohort of founders whose backgrounds are wildly different, creating a new cycle of female leaders who bring more women into the fintech workforce.

The investment firm has seen thousands of pitches from female founders from backgrounds including sustainability, law, beauty, and mobility, according to Palencsar.

“We can get more women involved in fintech,” Palencsar said. “But not everyone is going to look the same on paper.”

Take Ami Kumordzie, founder of Sika Health, for example. In January, she raised $6.2 million in a round led by Forerunner Ventures as a Black female-founder physician with no technical experience. Kumordzie has developed a fintech platform to connect consumers with IRS-compliant merchants.

Unlike financial services, healthcare is a largely female-dominated industry, with women holding 76% of all healthcare jobs, according to data from the U.S. Census Bureau. When women use fintech to innovate in healthcare, they show other women the potential to create more financial services solutions in their industry.

Network Effect

By opening up fintech to entrepreneurs outside of finance and technology, investors widen their pool of potential startup founders and increase the likelihood of more capital being raised by women.

“Founders with less traditional finance or tech backgrounds were also hiring more women who didn’t necessarily think they would be in fintech,” Palencsar said. “It creates this network effect.”

When women lead startups, there’s a better chance of attracting female talent. Businesses with female founders build teams with 2.5 times more women, and companies with a female founder and executive hire six times more women than those led by men.

Plus, women founders with diverse experiences and backgrounds are well-suited to build outside fintech’s oversaturated marketplace. This is critical to embedded finance as more business sectors look to expand their presence.

Greater Market Share

Embedded finance allows businesses to differentiate their offerings and tap into a broader customer base. In 2021, embedded finance already reached $20 billion in revenues in the United States alone, according to McKinsey.

This figure is expected to grow significantly in the coming years as more companies realize the potential of this form of finance and consumers’ expectations for digital financial tools increase.

By leveraging embedded finance, companies can create innovative products and services that provide customers with greater convenience and value. It also enables them to maintain a competitive advantage over other fintechs in the market.

However, capitalizing on the growth of embedded finance will require companies to diversify their workforces. That requires women leadership as researchers found that male-founded startups have less diverse teams compared to women-founders.

In that light, investors and businesses have a significant incentive to ensure embedded finance unlocks funding for female founders.

Ultimately, misconceptions around fintech and biases within venture capital perpetuate cycles of exclusion for investors and female founders.

To evolve, venture capitalists must look beyond traditional finance and technology and focus on investing in more women and diverse founders in adjacent industries.

By exploring solutions to the financial services pitfalls in different industries, female business leaders can have a hand in pushing the fintech industry forward. With the proper support, more female entrepreneurs will become a formidable force in the fintech space.

You can hear Katie Palencsar’s full interview on Humans of Fintech where you’ll learn more about: 

  • Media’s impact on the future of female-led fintech 
  • How Katie is thinking about investing in the future 
  • Ways to debunk the “pipeline” problem myth and other silly questions

This story is adapted from its original form, first published in Forbes as part of my fintech contributor page.