For as far as the world of fintech has developed in recent years, the picture is still yet to be fully completed. To this day, there continues to be many issues surrounding the promising world of financial technology.
To gain a better scope on the kinds of issues facing those who power the fintech world, we invited Lili Metodieva to guest author this week’s weekend read. Lili is the Managing Director of the European B2B banking facilitator Monneo.
In this piece, Lili details the challenges presented to the industry, what it means to be a fintech in a ‘post’ world – post-Brexit, post-Covid – and how it really feels to be a female leader.
Recent growth across the international fintech sector is showing no sign of slowing – in fact the Covid-19 era has been something of a boomtime for the industry.
By 2026, fintech is expected to be worth a staggering $324 billion globally. By all accounts the first half of 2021 is following the expected trajectory, growing at a compound annual rate of 23% over the forecast period 2021-2026; there were already 24% more fintech start-ups by the end of June this year, than in the whole of 2020.
Despite this startling pace of growth and continued investment from both the VC and PE communities, the European fintech market has not been immune to all new challenges presented by Covid-19 and Brexit. Here are some issues that have affected me personally and professionally in the last 18 months.
Covid-19 Has Impacted Industry Relationships
A significant part of fintech’s success story is its ability to quickly improve user experience by simplifying the complex and accelerating the arduous. This includes removing the need to physically talk to third parties when carrying out essential financial tasks, but instead, letting the software take over.
However, while removing the need for excessive human interaction for consumers using financial services has been a positive, face-to-face dialogue between the collaborative B2B industry has stalled during Covid lockdowns. The likes of trade shows and conferences provide those rare opportunities for businesses in fintech to share innovation, launch new products and services, and develop important partnerships that can’t be replicated to the same extent over email, or even video chat.
Consolation can though be derived from the fact that this was at least the same situation for everyone in the space and some return to normality is – we hope – on the horizon.
The Brexit Effect
Businesses across all sectors are often hesitant when it comes to discussing the effects of Brexit on international business, likely for fear of poking a hornets’ nest. It is a reluctance that now must be overcome because there are issues, many unforeseen, emerging across all areas of fintech. It’s important that these issues are properly addressed and dealt with.
For example, from 1 January 2021, UK fintech firms were no longer passported, meaning that actively marketing or advertising in the EU is no longer automatically permitted. Nevertheless, there exists no restrictions under UK and EU regulations or PSD2 which prevents UK payment institutions from providing services to EU clients if those clients seek these services. It’s a technicality that seems counter-intuitive to the purpose of fintech.
Then there is the international bank account number (IBAN) problem. Even though the UK is no longer part of the EU, it is still part of the Single Euro Payments Area (SEPA). Refusing to accept a payment from the IBAN code of a SEPA member is a violation of EU rules and yet, EU-based payment service providers and acquirers are becoming more reluctant to settle using UK bank accounts or IBANs, over concerns around regulatory complexity and increased administrative loads. This is quickly becoming unofficially known as ‘IBAN discrimination’.
Greater Diversity Is Leading the Charge to a Brighter Future
Though it can be tempting to catastrophise when large obstacles break the path to success, it’s important to remember that the challenges presented by Covid-19 are starting to recede and those presented by Brexit, with some greater industry collaboration, are not insurmountable.
There’s also another reason that fintech has cause to be quietly confident – it is emerging as a sector within which women can make, and are making, a real impact.
Today, almost 30% of the UK fintech workforce is female. Of course, the goal must be to achieve a 50/50 gender split, and initiatives are already underway to meet this objective. This is a great stride forward as financial services have always been perceived as being a male-dominated sector but within fintech, women are more visible than they have ever been.
It is crucial for women interested in joining the sector to understand; Women are under-represented in fintech, to claim otherwise would be false, but this is not because fintech is a hostile environment to work in.
A major cause for the continued gender imbalance in fintech is simply the lack of job applications from women. This can be partly traced to the fact that there are fewer females with the STEM qualifications (only 13% of candidates taking these studies are female) that fintech requires. This strikes more as a marketing issue than evidence of discrimination against women and it is incumbent on course providers to do more to ensure higher intakes of female students.
There is pleasing evidence that much more is being done to promote diversity across fintech. Some firms have taken to doubling finder’s fees for employees that recommend a successful female job candidate, while others are reviewing job descriptions to ensure the language appeals to female applicants.
Such initiatives, coupled with improving networking access and visibility of female professionals will lead to change. That change may be gradual – a bit too gradual for some – but it will happen. The key takeaway for any woman considering a career in fintech is to go for it.
Yes, there’s work to be done on forging greater equality but as with Covid-19 and Brexit, work is underway and solutions exist.