Diversity

Women Are Leading Latin America’s Fintech Revolution

Co-authored by Elizabeth Acuña Rivera and Greg Mitchell. Elizabeth is Associate at Angel Ventures and WeXchange Pitch Competition Project Manager. Greg is Regional Director of Angel Ventures and creator of the blog Ruta Startup.

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Finance services is an industry that has been particularly male-dominated, with women holding less than 10 percent of senior positions. Despite predictions that the fintech industry could disrupt the gender balance in the traditional finance sector, female leadership in fintech remains low in most of the world.

In Latin America, however, women are stepping up as fintech leaders, with five times as many female-founded fintechs as the global average. The Latin American fintech industry is booming, and women have been an integral part of the region’s success. In 2019, fintech received 31 percent of the region’s venture capital, and more than 35 percent of Latin American fintech startups have female founders.

The fintech opportunities in Latin America

The opportunity to create disruptive change attracted many of these women fintech leaders. With 70 percent of the region’s population without a bank account, and smartphone penetration in Latin America predicted to reach 80 percent by 2025, there is huge industry growth potential. Fintech offers convenient solutions to this large population of Latin Americans with mobile devices but no formal banking access, with the goal of replacing cash payments and increasing financial inclusion.

“Fintechs are taking more risks than traditional institutions,” said Inma Canadas, the co-founder and CMO of Keynua, which helps secure digital transactions through verified mobile e-signatures. “We’re rethinking and redesigning services and products in a dynamic way, and we will all benefit from a broader coverage of financial products for the population.”

Covid-19 has further increased the demand for digital financial services. Many Latin American governments are partnering with fintechs to create digital finance programs to increase financial access, fast-tracking the integration of third parties with traditional financial systems through solutions such as open banking. In early June, Mexico’s National Banking and Security Commission published new regulations for open banking, and Brazil will put into effect its open banking regulations beginning in November.

“With open banking coming into effect in Mexico and Brazil, it feels like open banking is becoming a dominant trend,” said Ximena Aleman, co-founder of Prometeo, an open banking fintech based in Uruguay. Prometeo’s platform digitalizes user information and facilitates bank transactions and online payments.

Helping traditional banks bring transactions online has been essential in light of Covid-19, which has highlighted the weaknesses in Latin America’s existing banking systems and permanently changed the requirements for doing business.

Challenges for female founders

While Covid-19 is propelling fintech adoption, it also exacerbates the challenges female entrepreneurs face. Gender inequality is already quite prevalent in Latin America, with Covid-19 likely increasing that gap.

Women in leadership positions regularly have to deal with being patronized, doubted, and ignored. “There is a bias that men are more capable of leading a startup in the tech industry,” said Tatiana Guichard, founder and CEO of the Peruvian motorbike financing marketplace, Somos Moto. “People think that, as a woman, I don’t have the knowledge or the ability to lead a tech company, and I have to waste a lot of time to break down that barrier and demonstrate that I am capable of doing what I do.”

Unfortunately, the investment gap is only widening in response to Covid-19, with women disproportionately affected. In one study by 500 Startups, 40 percent of female founders say they will not meet their fundraising goals this year.

In general, women earn and save less and have less job security worldwide. Latin America remains one of the regions with the most gender inequality, with women’s participation in the workforce increasing over the last 25 years to just over 60 percent. However, more work opportunities have not significantly changed the quality of life for women because many are also responsible for caring for family members. On average, women do three times as much unpaid care work as men.

Female founders juggling family care and running a business often face outright sexism. The CEO and co-founder of Runa, Courtney McColgan, has been asked questions such as, “Don’t you feel guilty about not spending more time with your kids or your husband?”

McColgan was CMO at ride-sharing unicorn Cabify before founding Runa, a cloud-based software company that helps companies manage payroll. Despite her proven success as an entrepreneur, she, like many women entrepreneurs in Latin America, is challenged to prove herself to others continuously.

Supporting women leaders

In the face of these challenges, women leaders look to each other for support and advice. In return for the help they receive, many women develop a strong sense of responsibility to pay it forward.

“As a female founder, I have to train and help more women establish themselves in leadership positions in their organizations,” said Claudia Quintanilla, COO and co-founder of currency exchange company Rextie. In this way, she hopes to “support gender equality and equity, and support women to challenge themselves and assume leadership roles.”

Evidence shows that this isn’t just lip service. Companies with at least one woman founder hire 2.5 times more women, and those with a woman founder and a woman executive hire six times more women. Articles promoting women-led businesses, industry networks, and events bring women leaders together to build a supportive community and create opportunities for other women to follow in their footsteps.

However, women can’t do all the work. According to Kushki COO and co-founder, Daniela Espinosa, what is needed is “support from different stakeholders, like government, universities, and corporations, mainly as fund providers.”

Changing the rate of women’s participation in tech requires intervention at an early age. In Latin America, one in four women has a child before the age of 18, which decreases her participation in the workforce and increases her responsibilities at home. Although more Latin American women hold STEM positions than the global average, lack of funding accounts for 56 percent of failed women-led businesses.

The future is female

Yet, gender inclusivity pays. Including women entrepreneurs equally could boost the global economy by $5 trillion, and companies with women founders generate 2.5x more revenue for every dollar invested than male-led companies. They also have higher stock prices and a 35 percent higher return on investment.

Although there is still much work to be done, women are gaining ground. In 2019, Latin America was the region with the highest venture funding invested in women-led companies. With Covid-19 propelling the demand for fintech services, 2020 could have even more growth.

“There has never been a better time to start a business,” said McColgan. “My hope is that we will see a boom in new businesses started out of Covid-19, and the percent of those that are founded by women will be significant.”

Disclosure: Angel Ventures is an investor in Somos Moto.

Illustration: Li-Anne Dias.

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