Fintech diversity success stories with Child Free Wealth, Pagaya, Illumen Capital and more
The need for diversity and inclusion in fintech has become a core element of the industry and is as integral to the success of its leading players as any other form of innovation. In recognition of its growing status in the recipe for success, Fintech Times will this month pioneer the topic through a month-long investigation into how gender equality is really delivered.
Fintech Times dedicates the month of April to showcasing the fintech industry’s smartest and boldest initiatives aimed at championing equality, diversity and inclusion for all.
To kick off our conversation, we’re joined by a range of industry experts to discuss their examples of how diversity and inclusion can be successfully delivered through the power of fintech.
Including lending with Pagaya
PagayaThe story began seven years ago when the co-founders understood how extensive the data well in the consumer credit area is, while also realizing how little of it was actually used in credit decision-making processes.
The Israeli software company rightly began to question the effectiveness of this data and how it could be better used to raise capital and facilitate lending to more qualified borrowers.
Ultimately, the founding of Pagaya is based on the pursuit of better synthesis of data and in recognition of the impact this can have on not only the economically underserved, but also the entire financial ecosystem.
Talking to Leslie Gillinthe company’s growth manager, she says that when viewed in its entirety, the question of data synthesis “really becomes quite exciting.”
Gillin admits that while other parts of the finance industry have dramatically improved their digital offerings, approaches to underwriting and credit decisions remained “outdated.”
This, she says, widens “a persistent gap in people’s ability to obtain certain financial products because partners face challenges working with hidden and limited data and technology infrastructure.”
In this, the company has recognized the flawed limitations of legacy underwriting systems and saw a huge opportunity to revolutionize risk assessment through the use of big data.
“Reimagining traditional underwriting methods”
“At Pagaya,” continues Gillin, “we make it our goal to reduce this gap through data science and artificial intelligence, so more people can access the financial opportunities they deserve to improve their lives.”
“By rethinking traditional underwriting methods,” she affirms, the company has been able to deliver “more financial inclusion in this country.”
Gillin explains how Pagaya allows banks and other lenders to “think outside the box” by leveraging its significant AI and massive data network, ultimately pioneering the expansion and scale of its lending population.
“We have developed a unique AI-powered network that connects our partners – financial service providers who produce assets using our technology – with third-party investors, who access these consumer credit funds through our network at scale,” she continues.
Gillin concludes by adding that “because of the massive network we’ve built, we’re able to unlock and realize incredible cross-applicability of our AI, beyond consumer credit, into areas like real estate and more.”
Funds for all
Currently, only 1.3 percent of the $69 trillion in assets under management around the world are managed by women and funds of color.
However, there are companies that The Illumen Capital which actively tries to unbalance rights. Talking about how the US-based impact investor has found success in doing this, its CEO, Daryn Dodson.
Dodson explains how Illumen Captial advocates a “fund-to-fund strategy that invests in private markets, including venture capital, private equity and growth funds,” with a focus on finding undervalued and overlooked fund managers.
More specifically, he identifies fund managers tackling “the world’s most challenging issues in education, health and wellness, financial inclusion, and climate and sustainability,” as the main target audience.
“Illumen Capital exposed the systematic gap”
He refers to the company’s ground-breaking research, produced in collaboration with Stanford SPARQwhich provides empirical evidence of bias that asset allocators demonstrate against high-performing black-led funds.
“In other words,” says Dodson, “Illumen Capital exposed the systematic gap in the analysis of the largest allocators in the world, which consistently overlooks the best funds because of race or gender.”
“Then there is a lack of opportunities to create economic value for its investors,” he adds.
Following the publication of the findings in 2021, Illumen Capital was eager to implement change, which Dodson confirms through its fundraising along with its education program for asset allocators to fully understand the biases present in their processes.
But at the same time, he explains how “asset allocators use the same lens to evaluate us.”
Dodson admits that “this was a challenge because we had to be careful not to spend too much time educating, while focusing our time and energy on executing our mission for those investors who wanted to be first movers in our unique differentiated strategy of to reduce bias and unlock impact and economic value.”
Finances for the childless
According to a recent study by Michigan State Universityone in five adults is childless, which means that they do not have children and do not intend to start a family.
However, this is not yet fully recognized by most financial systems, with rules and norms usually targeting those not recognized by this figure.
With this in mind, Child-free Wealth constitutes an extraordinary addition to this conversation so far.
The US-based financial services company is dedicated to serving childfree and permanently childless people, serving a niche demographic that is both underrepresented and underserved in finance.
Talking to Jay Zigmonta certified financial planner and founder of Childfree Wealth, he explains that while both he and his wife are childfree, they needed to gain a better understanding of exactly what the missing financial needs of this demographic were.
To achieve this, the founders initiated in-depth research including 299 surveys and 26 interviews to understand how being free from children affects lives and finances.
Zigmont explains how much of that research formed the basis of the book “Portraits of Childfree Wealth” and the company’s new self-directed financial planning product specifically for childfree people.
“Being childfree changes just about everything”
This research, he explains, culminated in the creation of 15 courses and 100 videos on common questions and issues for childless people, which are paired with either group or one-on-one support.
“What we found is that being childfree changes just about everything in your financial plan,” confirms Zigmont.
“It starts at the end, with most childfree people wanting to ‘die with zero,'” he continues. “In addition, childfree people tend not to want to retire in the classic mold and prefer to live a life of or financial independence, live early. We are also very aware of the changes in our estate and long-term care plans.”
Despite the company’s clear success, Zigmont acknowledges how “serving the child-free market can be a challenge.”
“I have a collection of ‘mean tweets’ from people considering the fact that we don’t have kids,” he reveals. “While some people are childless by choice, many others are childless by choice. In a post-Roe world, reproductive rights and privacy are important concerns.”
“We have had to go above and beyond to protect our customers. We also work hard to ensure our employees reflect the community they serve,” concludes Zigmont.
Putting money in the right places
While the need for innovation will also remain a point of pride among those tackling the fintech industry, dreams can still be dampened when the reality of funding checks in.
Funding is becoming an increasingly pressing issue for everyone involved in the industry, and is a particularly salient topic for founders with diverse and ethical backgrounds.
Yet it is those who actively recognize the importance of this topic that ultimately create the greatest change in the industry, and that is why VamosVentures forms an excellent conclusion to this discussion.
The Los Angeles-based venture capital fund with an eye on investing in early-stage technology-enabled companies led by Latinx and diverse founders.
As principal, Ashley Seda Aydinsays it, the company retains a strong belief that “there are great opportunities in the adoption and deployment of new fintech solutions for diverse communities.”
The current focus in these communities includes trends such as mobile wallet growth, improved financial education awareness, and more individuals starting businesses and looking for financial tools to build and scale.
Aydin expresses pride in the company’s investments in diverse and impactful fintech companies, quotes Total Wealth and Ouch as key examples of its power for change.
“Innovation can come from anywhere and anyone”
“Suma Wealth is on a mission to close the wealth gap and educate the Latinx community at all stages of life through toolkits and products around savings, life insurance, credit management and more,” she explains.
“Ocho delivers zero down payment credit-building auto insurance options for often overlooked and underserved customers,” continues Aydin.
With this, she explains how VamosVentures was founded to create more opportunities for different founders, as “we believe innovation can come from anywhere and anyone.”
“We’re at the tipping point of the golden age of entrepreneurial expression for diverse tech entrepreneurs,” she continues. “Diverse teams are also more successful!”
She also points to a landmark McKinsey study as proof of this, with the data confirming that diverse teams perform better.
“At VamosVentures, 100 percent of our portfolio companies are led by diversity, 88 percent of our portfolio companies are Latinx-led, 40 percent of our portfolio companies are women-led, and 100 percent of VamosVentures’ investment team is diverse,” concludes Aydin.
