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Hi, fintech fam! 💜

What a whirlwind the first six months of this year have been!

From taking ownership of Fintech Is Femme as an independent publication to securing my book deal with Wiley and submitting my 336-page manuscript for my debut book, Fintech Feminists, to hosting two Fintech Is Femme Summits while maintaining my regular twice-a-week newsletter cadence on top of speaking engagements and travel, I am officially taking a vacation.

I have been working nonstop to build this incredible platform and community, and now my mind and body are telling me to rest.

So, for the first time in three years, after over 300 newsletters, I’m taking my first break.

I’m heading to the beach and the desert for the next two weeks to get my mind right so I can return ready to share more insights and build alongside you.

So please enjoy this special issue; I’ll be back in your inboxes after vacay!

Looking for ways to support Fintech Is Femme? Be sure to pre-order or share the link with a friend to grab a copy of my debut book, Fintech Feminists: Increasing Inclusion, Redefining Innovation, and Changing the Future for Women Around the World, which will be hitting bookshelves on October 22!

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#TRENDING

What’s Up In Fintech

Every Thursday, I share news stories and trending pieces I follow. Think of it as a way to quickly find the most important news in the fintech world.

#1 Fintech And The City: The Rise of Milan

Italy’s second-largest city, Milan, is buzzing with innovation in the European Union.

It’s my most significant learning since arriving in Europe this week.

On Wednesday night, I was thrilled to partner with the City of Milan, including Yes Milano and Milano&Partners, to host a dinner with over 30 global fintech leaders — from regulators and investors to entrepreneurs — to discuss how we can create more inclusivity and international connectivity in our fintech ecosystem.

Milan is a lively hub for technological advancements, home to over 15,000 financial companies and 130,000 financial services employees.

The city's entrepreneurial spirit shines through its 2,800 startups, cementing its status as a European R&D capital.

Success stories like Nexi and Satispay, which have transformed payment and banking, and Klarna, an international player, highlight Milan's potential for innovation and growth.

With 11 international universities and 227,000 students, Milan attracts bright minds in hard sciences and the arts. This blend of capital and creativity turns extraordinary ideas into market-leading ventures.

Fintech is Italy's top investment sector, and startup valuations are growing the fastest here. Milan hosts over 45% of Italian fintech companies and draws 70% of Italy’s venture capital.

Clelia Tosi, Head of the Fintech District in Milan, plays a crucial role in developing this vibrant fintech ecosystem. With over a decade of experience in consulting and financial services research, Tosi champions Open Innovation as the key to transforming the sector.

Her vision blends technological, strategic, and process innovations, emphasizing compliance and regulation. Under her leadership, the Fintech District has grown to over 290 companies.

Tosi stresses that collaboration in fintech isn't just a choice; it's a necessity.

"We believe that collaboration in fintech is the right choice,” she said. “We hope to work together and bring Milan to the forefront as one of the most relevant cities for fintech."

The Milan Fintech Summit, organized with YesMilano, is Italy's most significant international fintech event, fostering this collaborative spirit.

Rise of Embedded Finance

One of the hottest trends in Milan’s fintech scene, which Tosi and I discussed, is embedded finance, which integrates financial services into non-financial platforms.

The global embedded finance market is expected to reach $623 billion by 2032, growing at 25.4% annually. In Europe, this segment is projected to hit $47 billion by the end of this year, mainly driven by the payments industry.

For example, non-financial entities like Booking.com increasingly incorporate fintech solutions to enhance their value chains and improve customer experiences.

Embedded finance is also important for attracting a swell of diverse entrepreneurs to the fintech scene, allowing innovators without traditional finance backgrounds to enter the space.

For instance, Ami Kumordzie, founder of Sika Health, raised $6.2 million in early 2023 to develop a platform connecting consumers with IRS-compliant merchants.

Despite her non-technical finance background, her success shows how expertise in one field can lead to groundbreaking fintech innovations in another, such as healthcare.

Initiatives like the Fintech District Soft Landing Program boost Milan's fintech ecosystem to bring more diverse entrepreneurs into the fold.

This program helps fintech companies establish themselves in Milan by providing crucial market insights, bureaucratic guidance, and valuable networking opportunities.

Milano&Partners and Fintech District act as business integrators for foreign fintech companies choosing Milan as their base, aiding them in setting up and expanding operations in Lombardy and Italy.

They offer comprehensive support throughout the company's stages, ensuring profitable growth.

The dynamic market, creative economy, and open innovation mindset make Milan attractive for fintech ventures.

A Strategic Hub for Fintech

Sustainability is a core value in Milan’s fintech ecosystem.

Tosi emphasizes that sustainable business practices are about more than financial success; they also contribute to market stability and leverage big data for long-term profitability.

This commitment aligns with broader European trends, where sustainability and inclusivity are increasingly vital to business success.

The city's commitment to fostering a supportive environment for startups and its emphasis on sustainability and open innovation set a model for other regions looking to develop their fintech ecosystems.

Ultimately, Milan’s rise as a fintech hub showcases the power of collaboration, innovation, and sustainability. The city’s focus on inclusivity as a core value is a key indicator of its future success.

Milan is boosting its local economy and setting an example for other cities worldwide by creating an environment where fintech startups can thrive.

The ongoing support for diverse entrepreneurs and integration of financial services into broader economic activities keep Milan at the forefront of the fintech revolution.

#2 Court Rules Against Fearless Fund’s Grant Program To Fund Black Female Entrepreneurs

On Monday, an appeals court ruled against Fearless Fund, a venture capital firm led by women of color, a significant blow to its Strivers Grant program, which supports early-stage Black-woman-owned businesses with grants ranging from $10,000 to $20,000.

This VC firm, which focuses on investing in tech and consumer-goods businesses owned by women of color, was found to likely violate the Civil Rights Act of 1866. The Act bans the use of race in contracts.

Fearless Fund’s Strivers Grant awards financial support to businesses owned by Black women. However, the American Alliance for Equal Rights (AAER) sued the fund last August, arguing that the grant discriminated against non-Black women founders.

This ruling prevents Fearless Fund from issuing grants, though it is not necessarily the final word. Fearless Fund is considering its next steps, including possibly going to trial, as reported by TechCrunch.

The lawsuit, spearheaded by Edward Blum—the same individual behind several Supreme Court affirmative-action cases—argues that the Fearless Strivers Grant program discriminates based on race.

The ripple effects of this ruling are already being felt in the fintech world.

Last year, fintech firm Hello Alice faced a similar lawsuit.

Co-founders Elizabeth Gore, Carolyn Rodz, and Kelsey Ruger of Hello Alice were sued by America First Legal, a nonprofit formed by former Trump White House adviser Stephen Miller.

The suit claimed that Hello Alice’s grant program, which is in partnership with Progressive and offers $25,000 grants to Black small-business owners, was unconstitutional.

Despite this, Hello Alice announced the dismissal of the lawsuit against it on May 28, maintaining its commitment to providing equitable access to capital for underrepresented entrepreneurs.

Why This Matters

This week, a VC investor looked me in the eye and said she didn’t think discrimination in VC investing against women and people of color was intentional.

Well, I call bullshit.

Given lawsuits and outcomes like these, it’s clear that discrimination is baked into the fabric of VC and, inherently, fintech.

The disparity between the rising number of Black female entrepreneurs and the minimal portion of venture capital (VC) investment they receive is a major problem for the fintech ecosystem.

These lawsuits divert resources into legal battles and potentially stifle innovation. Women of color, however, have shown remarkable resilience, allowing their businesses to thrive despite these challenges.

Female-founded businesses supporting marginalized communities are often criticized, even though diverse entrepreneurs create businesses with double-bottom lines—more profitable and sustainable.

The venture capital industry is at the core of this issue, which has historically favored white male founders. Despite efforts to portray VC as an equalizer, statistics show a stark lack of investment in companies led by women, especially Black women.

The lawsuit against Fearless Fund represents more than a legal dispute; it symbolizes resistance to efforts fostering inclusivity and economic empowerment.

The fintech sector, heavily reliant on VC funding, is particularly vulnerable to the ramifications of such lawsuits. Startups, already grappling with limited resources and high risks, depend on diverse funding sources to thrive.

Legal challenges like this could hinder innovation and restrict access to capital, stifling the industry's growth and potential for positive change.

The venture capital landscape’s homogeneity is a significant issue.

The industry is dominated by white men from Ivy League schools who tend to make funding decisions based on personal networks. This results in a lack of diversity in the companies that receive investment.

Only 2.4% of VC funding over the past 30 years has gone to companies founded by women of any race or ethnicity. In 2020, less than 0.35% of available funds were invested in companies founded by Black women.

Investment in Black-owned companies decreased from 1.5% in 2021 to 1.1% in 2022.

What We Can Do

The outcome of this lawsuit could negatively impact venture capital firms and fintech entrepreneurs, leading them to avoid catering to niche markets or underrepresented groups.

This may result in even fewer investment opportunities for fintech startups founded by women and people of color.

It's critical that we don't fall into this trap. Doing so will hinder innovation and keep us behind.

The fintech sector increasingly recognizes the importance of diversity in driving innovation and capturing untapped markets. We must organize together and maintain that momentum.

Investors and startups must navigate challenges like these discrimination lawsuits with a keen awareness of their implications for the industry’s future growth, profitability, and capacity for positive change.

Instead of feeding into the distraction, we must unite as a community, support each other intentionally, and innovate against the status quo while vocalizing the importance of policy changes, such as initiatives like California Governor Gavin Newsom's signing of Senate Bill 54, the Fair Investment Practices by Investment Advisers (New Diversity Reporting Law).

This law requires VC companies with ties to California to annually report the demographic information of the "founding team members" at their invested companies.

This first-of-its-kind law aims to address the inequitable funding distribution to women- and minority-owned companies. With over 5,700 VC firms in California, this law is expected to have significant consequences for the venture capital industry in the United States.

By focusing on sustainable, inclusive growth and demanding—as a community—regulation and systemic changes, we can ensure the fintech industry’s success and resilience, even in the face of challenges.

#3 The Case For Camels Over Unicorns: Sustainability In Fintech

In today's fintech world, the focus is shifting from rapid scaling to sustainability (thank goodness).

This shift is about valuing long-term, profitable growth over chasing high investment returns.

Think of it as choosing camels over unicorns—favoring resilient, enduring growth models like camels instead of unicorns' dazzling but often fleeting success.

As of July 2023, fintech companies have made significant strides.

A report by McKinsey & Company highlighted that publicly traded fintechs reached a market cap of $550 billion, doubling since 2019. Moreover, the number of fintech unicorns skyrocketed to 272, with a combined valuation of $936 billion, up from just 39 firms five years ago.

Despite these impressive figures, a market correction triggered a slowdown in this explosive growth momentum.

Why This Matters

At the Money 20/20 Europe event in Amsterdam, Kimberly Ofori, a partner and director at Future Ventures, made a strong case for prioritizing sustainable growth. She warned that investors who don't recognize the importance of sustainability in the next three years will be outpaced by those who do.

The main takeaway? We need business models that can scale quickly and are also sustainable in the long run.

This shift underscores the need to choose between rapid growth and long-term sustainability.

Not every company needs to scale at lightning speed; different types of funding suit different business needs.

The ultimate goal is to build sustainable businesses with a high impact.

For example, unicorns in the Netherlands often struggle with profitability post-IPO, showing a clear need for more sustainable growth strategies, Ofori shared.

The camel analogy is particularly fitting for fintech companies. Camels, known for their endurance and ability to carry heavy loads over long distances, symbolize sustainable practices. Fintech firms should aim for similar steady, long-term growth.

To adapt, investors and stakeholders should shift their strategies towards providing long-term support to reduce the risk of small business failure and balancing the desire for "unicorn" status with building a solid foundation for sustained economic growth through varied business models.

The industry can achieve long-term success and resilience by focusing on building lasting businesses rather than seeking quick wins.

This will require a significant change in investment strategies and mindsets, highlighting the value of sustainable, scalable growth.

_{MARK YOUR CALENDARS}

Since I’m on vacation, let’s fill those calendars with virtual events, good Fintech Is Femme reads, and podcasts to get your Fintech feminist insights rolling. Here are some of my favorite pieces from the FIF Library!

_{TUESDAY 6/11}

[PODCAST] The Female Founder Funding Gap—How To Actually Improve It

In this episode of Humans of Fintech, I take the mic solo to report on an incredibly important study by female researchers Kaisa Snellman and Isabelle Solal, who found that female-founded firms with initial female VC funding face more difficulties securing future financing, unlike male-founded firms.

An experiment revealed that female founders with female VC support were rated less favorably due to assumptions of gender-based funding, highlighting bias. Ironically, significant capital continues to flow to a select group of white, male, Ivy-league-educated individuals without similar scrutiny.

To address this funding bias, the researchers found that we need to increase the number of female investors and create gender-diverse investment teams.

As more female VCs finance ventures, especially with significant sums, the gender bias in investment decisions may diminish, leading to better support for female entrepreneurs.

In short, to improve funding, we must organize and call on financial systems and policymakers to fund female entrepreneurs fairly.

Tune into this episode here.

_{TUESDAY 6/18}

[READ] Fintech Firms Urged to Prioritize Women Customers for Long-Term Success

Catering fintech products to women isn't just a nice-to-have—it's a business imperative that will propel your company ahead of the competition.

Fresh research from the International Finance Corporation (IFC) dives into this, showing how analyzing gender differences can give fintech firms a leg up in tapping into the $31 trillion female market and boosting financial inclusion for women overall.

For example, it might cost a bit more to acquire female clients, but about 63% of fintech companies that specifically tailor their products and services for women end up with customers who stick around longer, bringing in more value over their lifetime.

I break down the highlights of the report here. The full report, Her Fintech Edge: Market Insights for Inclusive Growth, offers insights on fintech firms' perceptions and practices in serving women's customer segments. Download your copy here.

_{THURSDAY 7/11 & 7/25}

[VIRTUAL] FREE ELLEVEST WORKSHOP: Generational Wealth, Part 2: Estate Planning

Many people don't think about estate planning—figuring out what will happen to their assets when they’re gone—until later in life. But, like most things in financial planning, the earlier you start, the better off you and your loved ones will be.

Join Ellevest, founded by fintech entrepreneur Sallie Krawcheck, for a live, 45-minute webinar hosted by a CFP® pro from their all-women team. She’ll cover everything you need to know about estate planning, including why it’s so important (especially for women) and how to create and preserve wealth for the next generation in a way that works best for you.

They’re hosting the workshop on 2 dates — July 11 and July 25— save your seat here.

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_FINTUNES

🎵 Sabrina Carpenter & Mark Ronson - Espresso

Yes, my give a f*cks are on vacation 🙂 

That’s all for now! Stay safe, everyone. Hug your loved ones. See you soon!

Love,

Nicole

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