A practical guide to de-risk your fintech startup through diversity
The global fintech market was worth $127.66 billion in 2018, with a predicted annual growth rate of ~25% until 2022, to $309.98 billion. According to data from Innovate Finance, the UK fintech sector attracted record investment of $4.9 billion in 2019, surpassing the $3.6 billion from 2018. This makes the UK the second biggest fintech market in the world, after the US, when it comes to VC investment. With such a rapid growth, the UK FinTech industry presents many opportunities for startup founders. However there are many inherent risks associated with Fintech startup businesses: from frequent malware attacks, to fierce competition with huge financial brands, to falling behind with innovation and not acquiring new customers fast enough. Fintech startups are particularly exposed to serious risks to the business. How can fintech startups de-risk their business to thrive in a complex economic environment? Here are 4 ways fintech startups can de-risk their business through building more diverse teams.
1. Hire neurodivergent talents to prevent malware attacks
2. Build an irresistible, diverse brand to compete with financial corporations
3. Assemble a highly heterogeneous engineering team to boost innovation
4. Diversify your salesforce to win new customers
1. Hire neurodivergent talents to prevent malware attacks
According to ImmuniWeb research, an impressive 98% of fintech start-ups are vulnerable to phishing, web, and mobile application security attacks. The research also revealed that for all Fintech startups, 100% of the mobile applications contained at least 1 security liability of a medium risk with 97% having at least 2 medium or high-risk vulnerabilities. With such a high-risk of malware attacks, FinTech startups must adopt a strategy to avoid such threats to their business.
Neurodivergent individuals have long been recognised for their above average talents in IT, and particularly in cybersecurity. Neurodiversity variations can include dyspraxia, dyslexia, attention-deficit hyperactivity disorder (ADHD), dyscalculia, autistic spectrum, tourette syndrome and others.
Neurodivergent teams have been found to spot patterns others do not see. The Israeli Defence Forces Special Intelligence Unit 9900, which is responsible for analyzing aerial and satellite imagery, had a group staffed primarily with people on the autism spectrum. It has proved that they could spot patterns others did not see. According to a 2019 SCA Magazine article, the UK tech industry has twice the number of neurodivergent individuals compared to the general population and the BIMA Tech Inclusion & Diversity Report 2019 found that 28% of those in technical IT roles are neurodivergent.
In other words, neurodivergent talents excel in technical IT roles and should be actively hired and retained by FinTech startups to leverage their potential in preventing malware attacks. Considering that FinTech startups are at high-risk of cyber attacks, it is clear that hiring and retaining neurodivergent talents in their cybersecurity teams will significantly de-risk their business.
2. Build an irresistible, diverse brand to compete with financial corporations
Fintech startups are faced with two large competitive threats: on one hand, they compete with large, well-established financial corporations, such as Goldman Sachs, Morgan Stanley, credit Suisse and on the other hand, they also compete with large technology giants expanding into financial services such as Amazon (Amazon pay, Amazon cash, Amazon lending, Amazon paycode, Amazon allowance and more).
Fintech startup founders and CEOs are facing the significant risk of failing to make their brand heard in the noise of all their competitors who hold significant spending power in marketing, advertising and PR.
According to a study by Deloitte-owned agency Heat, “brands that show a broad variety of cultural and demographic groups in their advertising see improved perception among consumers and stock market gains.” Brands with the highest diversity scores showed an 83% higher consumer preference. Interestingly, Heat found that the stocks of financial services companies performed particularly well during the study period.
FinTech startups should invest in diverse marketing and advertising, meaning hiring a diverse marketing team, to address the risk of not having their brand noticed in a very competitive financial services landscape.
Bonus tip: a diverse brand also helps Fintech startups raise capitals. As Zoe Jervier from EQT Ventures says: "I usually get introduced to founders early and get a read on the team composition. As part of that due diligence I am getting to know the team and detect opportunities for improvement on diversity”.
3. Assemble a highly heterogeneous engineering team to boost innovation
The global fintech market was valued at about $127.66 billion in 2018, and is expected to grow to $309.98 billion at an annual growth rate of 24.8% through 2022, according to the business research company. The ability to develop the software required to turn ideas into solutions is key to startup success. FinTech startups in particular face the risk of falling behind their competitors as the fintech industry is booming and more Fintech startups are created every year.
“Innovation is driven by the intersection of a myriad of voices. The global diversity of voices and experiences that meet in the UK provide the perfect turf for innovation and material disruption. In fact, Neyber’s innovative solution to a UK market need is a result of a cultural savings experience from our founder and CEO.” Monica Kalia – Co-Founder & Chief Strategy Officer at Neyber.
Innovation is key for FinTech startups like Neyber (now Salary Finance) to avoid being left behind. Building diverse teams with a diversity of perspectives and voices is key to develop ground-breaking, innovative technologies and prevent being left behind.
4. Diversify your salesforce to win new customers
Fintech startup founders and CEO face the risk of not acquiring customers fast enough. Forbes listed “Cost-Effective Marketing to Acquire Customers” as a key issue for Fintech Startups.
Many studies support that a diverse workforce is a serious advantage in addressing new markets. FinTech startups in particular can benefit from accessing an expanded customer base because they are new to the market and need to acquire new customers fast. A diverse salesforce give a FinTech startups the perspective it needs to understand a diverse customer base and better sell to them.
“Change will only happen through a concerted effort from different angles: a top-down approach through inclusive and collected leadership; developing and inspiring a pool of diverse talent via a bottom-up approach; understanding the important role data can play in driving through the change by planning, tracking and measuring diversity programmes.” Clare Black - Head of Diversity at Innovate Finance
Even the British government recognised the need to diversity the workforce in FinTech in the April 2019 UK-fintech-state-of-the-nation report by the Department for International Trade for Great Britain: “Gender diversity statistics in FinTech are not as progressive as we would necessarily expect or want them to be. The wave of founders that has come out of banking has been predominantly male, so unsurprisingly, 83% of all FinTech executives are male. Women represent just under a third of total staff in the FinTech sector and female founders are still struggling to raise capital with unconscious (or conscious!) bias against women-led organisations. “
In summary
Fintech startup founders and CEOs face an increasing number of risks to their business, especially since the new economic context has added even more threats to businesses globally. Startups in FinTech must de-risk their business before it is too late. By embracing diversity and inclusion, Fintech startups can successfully de-risk their business and achieve success. Book your meeting today with Inspired Human to de-risk your Fintech startup through our diversity programmes tailored to startups.