Higher gender pay gap in fintech driven by lack of transparency

It is no secret that fintech has a diversity problem. But following publication of a report which estimates a higher-than-average gender pay gap in the industry, there are growing calls for greater transparency around pay and addressing low female representation in higher paying roles. 

A recent survey published by EY and Innovate Finance, “Changing the face of UK FinTech: from glass ceiling to open doors: championing equality and career progression for women in FinTech,” found that a lack of salary transparency and low female representation in senior roles are driving a higher-than-average pay gap in fintech.

The EY report estimates that the gender pay gap — the difference between men and women’s median hourly earnings — in fintech is around 22%, compared to 14.9% for all types of employees across all UK industries, based on Office for National Statistics data. 

The research, which was UK-focused and included interviews with 120 nominees of the Innovate Finance Women in FinTech Powerlist, found that barriers to success still exist within the sector, with top female leaders in UK fintech citing a lack of industry recognition for their contribution (27%) and non-transparent promotion processes (25%) as particular challenges to career progression.

The report found the UK fintech industry to be less gender diverse (72% to 28% male/female representation) than the broader financial services sector (56% to 44% male/female split). However, fintechs were more diverse than the tech sector in general.

Only 6% of fintech CEOs globally are female. Women hold around 11% of all fintech board seats and only 40% of fintechs have appointed a woman to their boards globally.

“These numbers are just not good enough,” says Anita Kimber, a partner in fintech policy and ecosystem leader at EY.

“The UK government clearly wants fintech to be a success. It's doing a lot of things such as setting up the Centre for Finance, Innovation and Technology. But unless we get a diverse industry, it won't be as successful.”

Chris Woolard, head of UK fintech at EY and chair of EY’s global regulatory network, says the fact that female representation, particularly at board level, is still so low is not sustainable for an industry in growth mode.

“Now is the time to build on early progress with further regulation to help drive a material narrowing of the gender pay gap,” he says.

“Change has to be accelerated and an environment fostered that encourages greater diversity of thinking. Not only because it is the right thing to do, but because it will ensure the UK fintech sector is in the best possible position to continue leading the way globally.”

A dearth of data 

Most UK fintechs are not required to report under the UK’s gender pay gap legislation as they have less than 250 employees. “It is important to note that the 22% pay gap in fintech is just an estimate,” says Ms Kimber of EY, “and that's part of the problem.

“There’s a statistic that we picked up last year that has stayed with me, which says 70% of men in fintech think that their industry is diverse and 30% of women think it’s diverse. For me, that is the heart of the problem. Unless we can clearly showcase data that says that it’s not diverse, well-intentioned people will continue to believe that there's no issue.”

Edwina Johnson, head of international at Alloy, a fintech company that specialises in smart digital identity and risk management in financial services, believes reporting and transparency of gender pay gap data is critical.

“Without reporting, you have no measure of success and no accountability,” she says.

You cannot have a conversation without data, says Sophie Winwood, a principal at venture capital (VC) firm Anthemis, which invests in businesses committed to resiliency, transparency, access and equity.

“While I definitely do not think this is a silver bullet, and will solve everything, it’s like the starting point in a way, because if you don't have the data, then you can’t get different stakeholders to work together to understand the problem and figure out a solution.” 

EY’s women in fintech report recommends regulation to narrow the gender pay gap, along with clearer career progression paths to move the dial on gender diversity, equity and inclusion (DEI). It says fintech firms – both large and small – should commit to consistent salary bands to ensure parity when hiring and look to improve salary transparency by using “tech-enabled solutions and engaging payroll and accounting software companies to automate processes”. 

It also recommends ensuring women are being adequately informed of the value of equity stakes, stock options and other reward and compensation options available.

An industry funded by men, for men

Fintechs typically present themselves as being at the cutting edge when it comes to how they are using technology, so why are they not as innovative when it comes to diversity, particularly when there is a growing body of evidence to suggest that companies which are more diverse are better run, more successful and ultimately more profitable?

Within start-ups, Ms Johnson says the culture is set within the first 10 to 15 initial hires. “If you don’t prioritise it right from the start, it’s harder to build into your business.”

She says there is also still a traditional view of what start-up success looks like set up by people (mostly male) who were well connected to VCs, that had the network and the cash to be able to start businesses. “A pattern of success was set there and then held up as the ideal.” 

Most start-ups historically have been led by white men, explains Ms Winwood. “That means you're getting a lot of talent who've been through it before, who understand the start-up process, who have been working on more tech-enabled solutions, just because they've been part of this industry that has been funded by white men, for white men.”

Ms Johnson says having more VC firms led by women partners to target and build out a diverse and inclusive venture funding model would make a difference.

“If you're a VC firm and you only have a kind of white male set of investors, I think you will lose deals because people will want to take their business to people that they can relate to, or reflect the values they have, and I’m hoping that’s a greater trend that’s happening across the industry that’s going to see change.”

VC firm Anthemis has diversity as part of its due diligence process. “We have a question in our due diligence questionnaire about how diverse an organisation you are and how you're going to facilitate that as you grow,” explains Ms Winwood. 

However, Anthemis may be the exception rather than the norm in the VC community, which could explain why many women-led fintechs struggle to even get funded. “Only 15% of general partners [in VC firms] are female,” says Ms Winwood.

“They control even less of the capital. And so again, if you don't have diverse decision-makers, then it stops the flow of capital going into diverse founders.” 

However, she believes that if more women enter into decision-making roles in VC firms that will filter down to capital because they will be more actively focused on gender diversity.

“If you believe that the board needs to build shareholder value, and the stats around a more diverse team builds a better business, then it is your fiduciary duty to the company to make sure it’s a diverse work base.”

Ultimately, Ms Winwood believes the debate needs to move away from the industry having a diversity problem and needing more women to focusing more on the fact that by being more diverse, firms will make a lot more money.

“We’re leaving money on the table by not having diverse companies, female founders and more diverse leadership. That reframing of the conversation is an important step.”

However, in the current economic and high interest rate environment, where fintech founders are focused on shoring up profitability and gaining access to capital, diversity can take a back seat to other considerations.

“Someone said to me, diversity is a low interest rate phenomenon because when everything’s going well, you have time to focus on diversity and make it a priority,” says Ms Winwood.

“But when everything’s crashing around you, then it’s one of the first things that goes out the window, which is a real shame, because actually, this is when it needs to be focused on the most.”