Financial Services are Failing Women — Can Fintech Be the Solution?

When it comes to gender and finances, the data is clear: women are, and have been, excluded.

Globally, about one billion women are unbanked, making up 55% of the total. In a study of 18 countries, women hold 25% of deposit volumes and represent only 20% of loan volumes. In the U.S., the world’s richest country, only 48% of women invest compared to 66% of men. And in case of an emergency, 22% of women said they would immediately be unable to afford their current lifestyle (the same question polled 13% amongst men).

Furthermore, it’s not just individuals who are facing financial obstacles — it’s also their business endeavours. Only 2% of U.S. companies receiving venture capital funding in 2021 were women-owned or led. Women-owned businesses are less likely than men-owned businesses to receive loan approvals (32% vs. 35%, respectively). And when they are approved for loans, women-owned businesses get worse terms on average, such as shorter-term funding with higher annual percentage rates (APRs).

These statistics paint the reality of gender disparity in financial services, and are concerning given that in the U.S., women are 80% more likely than men to retire into poverty. In Canada, 16.3% of senior women are in low-income brackets, compared to 11.9% of senior men.

Taking all these facts together, we get a picture of deep financial insecurity for one-half of the population that should worry anyone. Too many women are still unable to fully participate in the economy, constraining their choices and risking their lifetime security. At the same, financial services companies are failing to capture this large and critical demographic.

Can Technology Help Close the Gap?

Traditional avenues of financial services, such as banks and asset management firms, have tried to close this gender gap. Despite their efforts, and as the numbers above reveal, the gap persists.

This is where fintechs enter.

By leveraging cost-saving technologies, like automation and artificial intelligence, fintechs can offer more value to customers such as lower (or zero) fees and rates, less paperwork and faster processing times. Moreover, there are vast amounts of fintechs who are strongly mission-driven, claiming to be “democratizing” forces within financial services. In other words, fintechs have claimed they have the technologies and the drive to bring financial security and riches to the segments that banks and traditional firms have failed to reach, including women.

But is this truly the case? In my research, I ran into three big questions surrounding the impact of fintechs as a solution to closing the financial gender gap. To cover each of these questions in more detail, I have written a series of three dedicated articles linked below.

Question 1: Are fintechs able to appeal to and serve more female customers than traditional methods?

Fintechs may be more accessible than traditional methods in several ways, but it is still unclear whether fintechs are more successful at capturing specifically the female customer demographic.

In “How Can Fintechs Serve More Women Customers? The Gender-Intelligent Design to Drive Business and Inclusion”, I explore what the data says and attempt to ascertain whether fintechs are able to capture women customers who would otherwise be overlooked, and whether fintech companies have been able to achieve gender parity in the customer base.

Through this analysis, I faced the deeper question of why a gender gap exists in financial services — is it a technology or processes problem? Then, I focus on what fintechs can do in order to be more inclusive and attractive to female consumers.

Question 2: Can female-focused fintechs serve more women customers and close the gender gap?

Inclusive fintechs are relatively new, but growing in popularity. They are a subset of fintechs that focus narrowly on one or a few customer demographics that have historically been excluded from accessing financial services. For example, some inclusive fintechs focus specifically on women, or people from a certain background or industry or affiliation.

By focusing their customer base narrowly, inclusive fintechs not only acquire customers and potentially provide value, but they also seek to perform a social good. In “Can Women-Focused Inclusive Fintechs Bridge the Financial Gender Gap?”, I examine a few inclusive fintechs focusing on the women’s market, analyze how they work, and try to understand whether these businesses have had success in bringing in more female customers to financial services.

Question 3: Does artificial intelligence (AI), the technology driving many fintech companies, reduce or increase bias towards female customers?

Fintech companies use many different technologies to provide services while also saving on costs. One of the main technologies fintech companies have leveraged is AI. Through its predictive power, AI can help fintech companies automate decisions, save money and find more optimal outcomes.

But AI is a double-edged sword. Without high quality historical data, AI has the danger of simply regurgitating the past and its biases. Nowhere is this more evident than in credit and lending, where biases towards race, gender, and more end up informing credit decisions, oftentimes rejecting applicants that are people of colour and/or women at disproportionate rates.

In “How Does Artificial Intelligence Affect the Fintech Gender Gap?”, I investigate the role of AI technology in making credit decisions, and what fintech companies who use this application can do to reduce their risk.

Fintech and the Gender Gap

Fintech and gender is a complex issue. There are many considerations, and it’s always evolving. These three questions are the main ones that I encountered in my research, but I encourage additional research and conversations around this topic in order to continue advancing gender parity in financial services.

This article is Part 1 of a 4-part series exploring the gender gap in fintechs. Click here for Part 2, Part 3 and Part 4.

— —

Note: Fintech is a broad term referring to technologies that have been created to improve and better facilitate traditional forms of finance (for business and consumers). A fintech company can be a start-up or an innovation arm of a bank. In this article, when I refer to a fintech or a fintech company, I focus on the usage of technology that is more efficient and less costly than traditional methods and forms.

This article series is part of the MBA Student Fellows Program at the University of Toronto’s Institute for Gender and the Economy (GATE) at the Rotman School of Management. GATE promotes an understanding of gender inequalities and how they can be remedied — by people of all genders — in the world of business and, more broadly, in the economy.