2022 FinTech Investments, Talent Flow Themes, and The Need for Greater Diversity

Feb 23, 2022 | WP Culture, Uncategorized

FinTech Investments, Talent Flow, and The Need for Greater Diversity

Willard Powell is committed to building teams that build a better world. For over a decade, we’ve been dedicated to helping innovative businesses find talent to carry out their world-changing missions. We recognize, though, that without team diversity, even the best businesses aren’t able to truly initiate meaningful changes. This is particularly true in the FinTech industry, which has seen substantial growth in recent years. Billions of dollars are flowing into the FinTech sector, and with these new investments, talent networks are being realigned and incentives are being reassessed.

Things are changing fast, yet the focus and rate of diversity initiatives in FinTech still lags behind advancements made at traditional financial services firms and big tech companies. As a premier executive recruitment firm, Willard Powell aims to correct this discrepancy.

It’s impossible to discuss the rapid changes in FinTech without acknowledging the industry’s origins in traditional banking. Over the last decade, investments made in FinTech have grown yearly, and significant hiring efforts have been the result. Innovations unimagined ten years ago are now being implemented and will have lasting effects for generations. Though the intersection of finance and technology is a relatively new concept, the basic concepts still used in modern banking have been around for centuries. Many of our modern society’s efficiencies and problems exist because of:

  • Ideas that were conceived a millennium ago
  • Societal structures that were implemented centuries ago
  • Technologies that were developed decades ago

In particular, the idea of credit, the structure of central banking, and creation of credit cards[i] were transformative developments that are still relevant today, and worth considering as FinTech helps shape a new world. FinTech’s challenges and opportunities are emerging as the industry continues to grow. It’s crucial that any new industry is structured in a way that protects and empowers all of society, not just those who’ve historically been at a disproportionate advantage. As a society, we must implement new ideas, societal structures, and technological advancements that better protect everyone. To do this, we must improve the way that we care for each other as people and make important decisions together. This can’t be done without a diverse workforce.

 

FINTECH INVESTMENTS

The enormous investments into the future of FinTech are unlikely to slow down any time soon. Investors wield significant power in shaping new FinTech firms, and if the investors themselves aren’t diverse, it certainly hinders the chances of these emerging businesses being diverse, too. Without diverse viewpoints informing the problem-solving process, there is always the risk that new ideas will still be based on old-fashioned ideals that have historically harmed marginalized groups.

Top US FinTech Startups – Segmented by Number of Bank Investors in the U.S. [ii]

 

Bar graph of the top U.S. FinTech startup segments

 

For some time, large banks have been major financiers of promising start-ups, supporting them through incubator functions, and sometimes even purchasing them outright. Large banks have also typically led as FinTech investors. However, in recent years, Venture Capital firms have been the driving force behind the growth of FinTech. In fact, “fintech companies raised $132 billion in 2021 and accounted for 21% of all venture dollars, as the hottest type of venture capital deal”[iii]

Globally, Sequoia, Accel, Ribbit, a16z, and Index Ventures were among the space’s most active investors.

 

Table of the most active FinTech VCs from Q1'20 to Q1'21

 

Image Source: Cryptechie[iv]

 

As the impact on society from FinTech increases, paralleled with increased investments from VCs, so should the diversity of individuals who are responsible for determining the direction of FinTech firms and platforms. Yet there’s a long way to go when it comes to diversity at VC firms. According to 2019 data from Richard Kerby at Equal Ventures, two years ago, 58% of venture capitalists were white males, 20% were Asian males, 11% white female, and 6% Asian female. Additionally, only 2% were black male and 1% black female, while 1% were Latinx male and 0% Latinx female.”[v]

 

Bar chart highlighting women and minorities underrepresented in venture capital firms

 

The disparities are just as prevalent on the other side of the table, with FinTech founders being a homogenous group as well. In fact, “only 12% of global FinTech founders and co-founders are women, and only 6% of FinTechs have female CEOs … these numbers are alarmingly low … they are jarring given that funding for women-founded startups grows twice as fast as that for men.”[vi]  There is hope, though. Fairview Capital’s 2021 Market Review found that the number of women and minority-owned Private Equity and Venture Capital Firms is increasing, and it’s likely this will translate into greater diversity in careers in FinTechs – certainly a positive and reassuring advancement.

According to Fairview Capital’s 2021 Market Review, “the universe of woman and minority-owned firms grew to 627 firms, up from 502 firms in 2020, representing an increase of 25% over the prior year. Fairview observed a record 280 woman and minority-owned firms in market raising capital during the year, up from 234 firms in 2020.”[vii]

 

FINTECH TALENT FLOW THEMES

Navigating the complicated network and web of factors that influence flow of leading talent is influenced by competing investments from banks, big tech, private equity, and venture capital firms.  The diversity of investors isn’t the only factor influencing teams at current FinTech companies. Open-minded thinking on the availability of diverse talent will lead us to building these diverse teams. As a firm, Willard Powell has expert insights into industry-wide growth and talent movements. Recent research conducted by our team (using LinkedIn Talent Insights) uncovered some notable trends in FinTech hiring and talent flow:

  • FinTech firms with greater diversity have higher headcount growth rates and lower attrition rates. For example, Stripe has a more diverse workforce than many other comparable FinTech firms. The company outlines their commitment to diversity on their website, and have wielded the benefits of a diverse team.[viii] According to LinkedIn Insights, Stripe has experienced 78% growth of headcount and 10% attrition over the last year.
  • There is a notable talent flow from big tech to B2B FinTechs. In the last 24 months, Stripe’s three largest talent acquisition pools (by firm) have been Google, Amazon, and Facebook. Historically, big tech firms have typically done a better job at building diverse teams; this talent flow by-and-large likely supports the diversification of FinTech.
  • There is also a notable talent flow from large financial services firms to B2C FinTechs. In the last 24 months, Robinhood’s three largest talent acquisition pools (by firm), have been Fidelity Investments, TD Ameritrade, and Charles Schwab. Large financial services firms have often struggled to hire and retain diverse talent. As a result, this talent flow potentially counters the diversification of FinTech.
  • Large banks are making targeted efforts to acquire specialized skills from big tech. As an example, “J.P. Morgan leads Wall Street banks in blockchain hiring craze”[ix] and has hired blockchain talent from IBM to support Onyx.
  • Big tech firms are hiring significant numbers of Engineers and specialized payments talent from large banks and cards firms. Over the last 24 months, Amazon has averaged 10 hires per month from J.P. Morgan alone.

Some of the most innovative ideas are created by small teams of brilliant minds. The diversity of perspective that shapes these minds, is more important today than ever before. As FinTech continues to evolve, so will the industry’s needs for specialist talent and diverse perspectives. In particular, as we move into 2022, FinTech firms could benefit from greater diversity as they work to:

  • Democratize artificial intelligence: assisting with fraud prevention, anomaly detection, price optimization, and better credit scoring
  • Build new financial infrastructure: establishing better standards for use of cryptocurrency and decentralized finance
  • Create safe payments controls in the metaverse: creating greater opportunity for digital identity verification and contactless payments

 

THE NEED FOR GREATER DIVERSITY IN FINTECH

For FinTech firms to accomplish important initiatives and utilize new technologies, these firms will need to hire the best talent and build highly innovative diverse teams. As large investors commit to ESG initiatives there is an opportunity to influence how impact investments are directed towards diverse organizations. Today more than ever, we have a unique opportunity to build a better world, but we can’t do that without diverse talent leading conversation and playing a key role in shaping industry advancements. As an industry-leading executive recruitment firm, Willard Powell is committed to doing our part in diversifying FinTech workplaces.

Emerging technologies in FinTech have created new frontiers that offer us an entirely new way of creating financial services – a way that empowers and supports everyone, not just those who have historically held the most capital. As a united people, our knowledge of history is greater than ever before, and we can better see the opportunities and problems right in front of us. We must continue to come together and make important decisions as a community, compassionately. To make these compassionate decisions, we must continue to build a more inclusive society and teams with a broad perspective.

Together, we can more effectively solve complex problems. Working alongside each other, we must clearly discuss the pros and cons of our collective steps. To do this, we must learn from past mistakes. As an example, the development and implementation of credit cards would have been drastically improved if more people gave their perspective and helped educate others, decades ago. Credit cards created payment efficiency, but also saddled many with crushing debt at unmanageably high interest rates. We can learn from these past mistakes, and make better choices in the future.

 

FINTECH AND THE BLOCKCHAIN

Blockchain has emerged as the next big thing in FinTech. Blockchain is helping automate many tasks, a premise that has potential to revolutionize banking for the better. However, we need to understand that a tool misused has the potential to harm. We must ensure that the future of Blockchain has “blocks” that are used to build structures with open doors and “chains” that anchor boats available for everyone to sail. Use of emerging technologies in the creation of future financial services, like Blockchain, requires us to address both opportunities and problems in an inclusive manner.

This means FinTech start ups and firms need to have diverse teams.  Everyone needs to understand the good intent of new ideas and have input on the potential for supporting social structures. We must work together to implement tools that lead us towards continually creating a more equitable world.

Willard Powell is committed to this mission, and has demonstrated it through our work in the financial services, tech, media, and telecom industries. As a firm, we utilize a systematic and data-intensive process to analyze hiring trends, apply our industry expertise and deliver results for clients. Building diverse teams is a principle that guides every stage of our process. We will continue to build a better world together. The decisions that we make today, including how we build more diverse FinTech teams, will ensure a better world.

For more information on Willard Powell’s talent research, diversity, and sourcing services, visit www.willardpowell.com or email our Founder at david.mcinnis@willardpowell.com. Willard Powell is a market leader, hiring talent in FinTech, and building diverse talent pipelines. As a firm, Willard Powell has over a decade of Financial Services and Technology recruitment expertise. Our mission is to remove bias from corporate recruitment through systematic talent research. Follow us on Linkedin for more talent insights: https://www.linkedin.com/company/willard-powell-inc

 


[i] Paez Bowman, Cynthia. “The surprising history of credit cards: How this tech has evolved and where it’s headed.” CNET. January 3, 2022. https://www.cnet.com/personal-finance/credit-cards/features/the-history-of-credit-cards/

[ii] Eira, Astrid. “81 Key Fintech Statistics 2021/2022: Market Share & Data Analysis.” FinancesOnline. https://financesonline.com/fintech-statistics/

[iii] Gelsi, Steve. “Venture capital investments top $621 billion to set a record in 2021.” MarketWatch. January 12, 2022. https://www.marketwatch.com/story/venture-capital-investments-top-621-billion-to-set-a-record-in-2021-11641996104

[iv] Gupta, Nakul. “How VCs make fintech bets.” Cryptechie. July 24, 2021. https://www.cryptechie.com/p/vcmemo

[v] Williams, Lara. “Venture capital companies are blind to the benefits of diversity.” Investment Monitor. 7 April 2021. https://www.investmentmonitor.ai/business-activities/esg/venture-capital-firms-blind-benefits-diversity

[vi] Johnson, Vrinda. “10 Women in Fintech You Should Know About in 2022.” FinTech Magazine. December 28, 2021. https://fintechmagazine.com/financial-services-finserv/10-women-fintech-you-should-know-about-2022

[vii] “Woman and Minority-Owned Private Equity and Venture Capital Firms.” 2021 Market Review. Fairview Capital. https://fairviewcapital.com/wp-content/uploads/2022/02/FairviewCapital_2021MarketReview.pdf

[viii] Life at Stripe. https://stripe.com/jobs/life-at-stripe

[ix] Nicolle, Emily. “JPMorgan leads Wall Street banks in blockchain hiring craze.” FnLondon. November 9, 2021. https://www.fnlondon.com/articles/jpmorgan-bny-mellon-lead-wall-street-banks-blockchain-hiring-20211109

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About

David McInnis

President & Founding Partner

David has two decades of global recruitment experience and is Founding Partner of Willard Powell. Prior to founding Willard Powell, David worked with Leathwaite International, a global executive search firm. Before his employment with Leathwaite, David worked for Wachovia Securities (now Wells Fargo Securities) supporting the firm’s Investment Banking & Capital Markets Technology group. David is a graduate of Lasell College in Newton, MA, where he received a Bachelor of Science in Business Management with a concentration in Management Information Systems. David also serves as a Trustee on Lasell’s Board.