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Hi, fintech fam! 💜

Happy February 1st, and happy Black History Month!

I’m inspired year-round by our industry’s amazing Black founders, executives, and leaders. This month, I love that we are celebrating their excellence even more.

In today's issue, I’m sharing the top three stories of the week and interviews with Black fintech leaders who have been making a difference in our industry with their innovative ideas throughout the year.

Let's dive in!

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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 VC Inequity: Fintech's Imperative to Support Black Founders

Venture capital is the critical force behind the metamorphosis of groundbreaking technology ideas into transformative institutions, reshaping our financial landscape and society. 

However, the distribution of venture capital dollars, mainly to Black founders, paints a bleak picture of our fintech industry's future innovation and profitability.

In the U.S., Black founders secured a mere 0.48% of all venture dollars allocated last year, amounting to approximately $661 million out of $136 billion, according to Crunchbase data reported in TechCrunch. 

This figure represents a distressing decline from the preceding two years when Black founders raised at least 1%.

This downturn in funding for Black entrepreneurs has persisted since 2020, following the peak after George Floyd's murder, with the percentage dropping each subsequent year.

The first half of 2023 saw a significant decrease in VC funding for Black founders, with only $565 million out of $75 billion raised. This stark drop from $1.8 billion out of $144 billion in the first half of 2022 indicates a troubling trend.

Our actions today stop this trend in its tracks. 

Why It Matters: 

We are facing a challenging year due to a polarizing election that has politicized diversity, equity, and inclusion (DEI) and investing in Black entrepreneurs. 

Politicians are reframing DEI efforts as a negative to maintain the status quo, hurting our industry. 

For instance, VC Fearless Fund and fintech company Hello Alice are facing lawsuits for their initiatives aimed at providing more capital to Black founders. The lawsuits are based on the grants being explicitly tailored to Black founders. 

However, failed founder Adam Neumann raised more money in a single round than all Black entrepreneurs in a single quarter, yet no lawsuits have been filed against him.

One of the best pieces of advice I have received from my mentors is that these kinds of retaliations only occur when we are making progress.

What does that mean for us? 

Keep going. Keep pushing. Keep applying pressure. 

We need to support one another unequivocally throughout this year. The only way to combat the attack on DEI is to come together and intentionally hire, support, and invest in Black founders building incredible companies. 

Plus, embracing DEI will be what saves our industry from failing. 

Firstly, diversity is a hotbed for innovation. When diverse minds come together, the result is a remarkable display of creativity and outside-the-box thinking.

These unique perspectives, backgrounds, and experiences lead to the creation of inclusive and practical financial products that cater to a wide range of users.

A lack of funding for Black founders could negatively impact the profitability of the fintech industry.

Fintech has been at the forefront of innovation, offering new financial solutions and technologies to address traditional banking and finance gaps. However, a lack of diversity in investment could stifle this innovation by limiting the resources available to startups with unique and game-changing ideas.

Plus, diversity in fintech startups equates to happier customers. Fintech companies serve a diverse clientele, and having a workforce that reflects this diversity boosts empathy and cultural competence, leading to a deeper understanding of the needs of different user groups.

Lastly, diverse teams offer a rich talent pool for fintech companies to tap into. With different skills, knowledge, and expertise, they are formidable in problem-solving and decision-making. They bring various perspectives, resulting in business outcomes that increase profitability.

But above all else, our industry's biggest challenge is the hubris that anyone can solve without those directly affected in the room. Thinking that a single individual can address all our financial issues with technology is a recipe for failure.

Fortunately, several investment funds, including Anthemis, Gaingels, Flourish Ventures, Backstage Capital, Fearless Fund, and L'Attitude Ventures, are dedicated to fostering diversity in fintech.

To join the ranks of firms committed to diversity, here's some practical advice:

Intentionally hire and promote women and BIPOC individuals, break away from stereotypical assessments of entrepreneurs, and overcome overconfidence bias. Implementing standardized metrics and leveraging non-monetary strengths are additional strategies to drive transparency, accountability, and inclusivity.

Oh, and don't just offer mentorship to Black founders. They don't need mentorship. They need capital to support their innovative business ideas. 

By actively pursuing DEI strategies and investing in diverse founders, the industry can unlock new opportunities and drive success, wealth distribution, and economic value. 

#2 Takeaways for Fintech Leaders from the Big Tech Hearing on Child Safety

This week, the Senate Judiciary Committee rigorously examined the chief executives of five major tech companies, including Meta CEO Mark Zuckerberg, focusing on the potential harms inflicted by their products on teenagers.

The hearing, held earlier Wednesday, was marked by emotional moments, apologies from two CEOs, probing questions from senators, and reactions from families in attendance who have witnessed the negative impacts on their children.

Why It Matters:

The significance of this Senate hearing extends beyond the immediate scrutiny of tech giants. It underscores the consequences of a lack of diversity in positions of power, spanning AI, social media, and fintech.

Without leaders who comprehensively understand how to serve diverse populations, technologies inherently risk causing harm to users.

This point is illustrated by the case of Robinhood, a fintech company that faced a major crisis by blending social media with finance.

Following the GameStop Stock Surge of 2021, Robinhood was criticized for employing gamification strategies to attract young investors. In a tragic incident in June 2020, a 20-year-old Robinhood user took his own life after mistakenly believing he owed $730,000, as indicated by his account.

Simultaneously, the Senate hearing serves as a reminder of social media's impact on financial literacy among generations. In a Forbes piece, I explored the instrumental role of TikTok and other platforms in expanding fintech products and services to a broader audience, especially among women, Gen Z, and marginalized communities.

TikTok creators like Tori Dunlap, Humphrey Yang, Vivian Tu, and Lea Landaverde have transformed value-based educational content into thriving businesses. This has shifted a diverse demographic of fintech-curious consumers into customers and highlighted the potential consequences of a potential TikTok ban in the U.S.

Fintech industry leaders should be attentive to this, recognizing the market opportunity to provide financial education content to the next generation of wealth builders – Millennials and Gen Z, who collectively constitute 47% of the U.S. population.

A survey commissioned by Forbes Advisor, conducted by market research company Prolific, found that 78% of millennials and Gen Z believe they have greater access to financial advice through social media like TikTok than previous generations due to their identities, such as race, gender, or income.

This presents an opportunity for fintech companies to leverage financial education content, drawing Millennials and Gen Z into their user bases. As a creator on TikTok, I have witnessed the potential for fintech companies to build trust and community through educational content. However, only some, such as Eve Halimi, Anam Lakhani, and Vrinda Gupta, have embraced this opportunity.

Social media is a valuable tool for helping diverse populations with financial literacy and providing fintech services directly where they spend their time.

However, we must proceed cautiously and ensure our fintech industry does not fall into the same predicament as the big tech companies. We have to leverage our advanced technology for good. 

#3 Nasdaq Reports Higher Q4 Profit Amidst Fintech Transformation

Nasdaq, the renowned stock exchange synonymous with big tech, disclosed a robust fourth-quarter profit surge of 24.6% on Wednesday, propelled by stellar performance in its expanding fintech solutions business.

The company's strategic shift from market-sensitive trading activities to becoming a comprehensive data and analytics provider has been instrumental in this success.

In the last quarter, Nasdaq experienced a remarkable 32.3% surge in revenue, reaching $860 million, primarily fueled by the outstanding performance of its financial technology business.

The segment grew substantially, soaring from $231 million to $399 million compared to the previous year. As a result, Nasdaq achieved an adjusted profit of $395 million, or 72 cents per share, outperforming analysts' expectations of 70 cents per share.

Nasdaq's net revenue for the quarter reached $1.1 billion, marking the first time it has crossed the billion-dollar mark in a single quarter. This reflects a notable 23% increase compared to the same period in 2023.

Why It Matters:

Nasdaq is undergoing a significant transformation under the leadership of CEO Adena Friedman. Beyond the conventional association with tech giants like Apple and Google, Friedman envisions Nasdaq as not just a stock exchange but a fintech pioneer.

A pivotal move in this transformative journey was Nasdaq's $10.5 billion deal with financial software heavyweight Adenza on November 1. This acquisition is the culmination of a series of strategic moves, including a dozen acquisitions, aimed at reshaping Nasdaq into a formidable force in the fintech landscape.

With the acquisition of Adenza, specializing in managing investment risks and automating regulatory compliance communication, Nasdaq is poised to offer services to fintech companies and evolve into a fintech entity.

The challenge Nasdaq faces now is to make its fintech identity as recognizable as its established stock market legacy. The linchpin in this evolution is the successful integration of Adenza's software systems and its extensive workforce of 2,000 employees.

This transformation is not just about rebranding; it's about Nasdaq assuming a pivotal role in addressing the financial industry's critical pain points.

As Friedman propels Nasdaq into the fintech frontier, the lingering question is whether this economic juggernaut can pivot from stock charts to fintech breakthroughs.

So, looks like the exchange is heading in the right direction.

_INNOVATORS

Discover Black fintech leaders elevating our industry with innovation all year with Fintech Is Femme. 

Each leader’s name is linked to an interview so you can learn more about them and their businesses.

Sofiat Abdulrazaaq, co-founder & CEO, Goodfynd

Ami Kumordzie, Founder & CEO, Sika Health

Drew Glover, Co-Founder, Fiat Growth

Dr Iyandra Smith Bryan, COO, Quantfury

Michael Broughton, Founder, Altro

Kelly Fryer, Executive Director, Fintech Sandbox

Clayton Gardner, Founder & CEO, Titan

Lule Demmissie, CEO, eToro US

_{HUMANS OF FINTECH}

Future of Financial Education with George Nichols

In this episode, I sit down with George Nichols III, President of the American College of Financial Services, to discuss the future of financial education, financial advice, retirement, and where fintech fits into the equation.

Watch our conversation here.

_FINTUNES

🎵 Megan Thee Stallion - HISS

Megan has truly surpassed all expectations with this masterpiece! The visuals are absolutely stunning, the lyrics are pure genius, and the execution is flawless. She is undeniably setting a new standard for everyone in the industry.

Absolute royalty!

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

Love,

Nicole

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