Empowering women One Tech Innovation at a Time- Ritcha Ranjan, Talentnomics Board Member
Women’s History Month is a good time to reflect on and bring focus to the issues facing women today; balancing professional and personal lives, adjusting to the impact of the pandemic, focusing on health and wellness, lack of sponsors and mentors, wage gaps, etc. The list goes on and on.
Technology has emerged as a champion of women, empowering them across all these issues in ways that we would never have imagined fifteen to twenty years ago. Women-first technology products are here in all consumer verticals from finance, education, healthcare, media, and so on.
We examine two sub-verticals within fintech that have created a leap forward in enabling women economically: providing better access to financial products and lowering barriers for women to start a business.
Digital wallets were created to store money and have helped millions of women shift their economic situation. M-PESA, a digital wallet, was the first of its kind to be tied to a cell phone plan in Kenya. If you could add money to your cell phone plan, you could add money to your bank account. It created a more level playing field for women, eliminating the need to go to a physical bank and wait in line (in some cases for hours, leaving their job or children). It also removed the chance for a corrupt individual to extract a bribe as a part of putting their money into a bank account. In Kenya, access to a bank account has risen from ~20% to > 70%, with a 4% gender gap, far lower than it had been before M-PESA.
With money in bank accounts, women can start to generate interest and gain access to new investment vehicles to further increase their savings. Fintech players have lowered the minimum amount needed to invest which, in some cases, has allowed people to invest “spare change” by rounding up a transaction and investing that. AliPay was the first company to do this at scale with their Yu’e Bao fund. Fractional shares investing on apps like Robinhood or Stash in the US also allow people to participate at smaller amounts and help new investors learn the ropes with smaller risks, helping them have their money work for them instead of laying fallow in a cash box.
Saving and investing are not the only areas where Fintech helped give more women access to financial products. In the US, FICO scores have long been used for determining creditworthiness and the factors used in computing these scores have shown to be biased against women and younger people in the past. Several companies now give small loans based on alternative evaluations which allow more women to borrow and smooth out their cash flows between paydays. Innovative companies targeting developing nations employ this method so that women who often lack traditional credit signals, but are usually more creditworthy, can be included in the formal lending systems. In African and Asian countries, for example, some electrical utility providers determine credit worthiness by evaluating electricity bill repayment rates. Even FICO scores are evolving and now incorporate rent payments as a factor which should help younger people, especially women, get better rates and access to loans. This helps them avoid usurious lending rates from the informal markets which can often lead to a downward financial impact on a person.
Women currently account for 33% of entrepreneurs in the United States, having risen sharply in the past few years. While there are many factors that account for this rise, the lower cost to start a business is a significant one. Two major cost drivers for startups, rent and inventory holding, have dropped significantly with the proliferation of online stores, just in time manufacturing, and dropped shipping. Rather than a fixed price per square foot for rent, companies like Shopify or Etsy charge based on the volume of sales or transactions. Today, in a few minutes, a female entrepreneur can set up a storefront on one of the many selling platforms like Facebook, Shopify, Etsy, etc. for less than $300 per month. There are even lower-cost options. For example, women in India have started selling clothes and other items on WhatsApp by targeting their contacts and now can accept payment via the app.
Even marketing has shifted to allow for more precise targeting of specific user bases and entrepreneurs have the option of aligning their costs with sales volumes. For example, large platforms like Instagram, Google, and Microsoft Ads which cater to small businesses, allow people to use marketing strategies like paying only when someone purchases from their site. For a small company, it beats the days of fliers and television ads and allows entrepreneurs to understand what marketing channels are acquiring customers best and double down.
Though costs have been driven down, most people still need more capital than they have to start a business. Similar to personal loans, access to business loans for women has become easier, but is still not where we need to be. On average, women are approved at a lower rate for loans than men (32% versus 35% in 2021), receive smaller loans (2.5 times less), and pay a 1 percent higher interest rate. This is where platforms like Kickstarter and GoFundMe are helping to fill a void. Women can post their creative ideas and ask for funding to get started on their business. For as little as $10 others can support them in their endeavors.
Melinda Gates summed up the impact of technology so eloquently said in an interview with Stephen Colbert:
“That cell phone has so much power in the hands of a poor woman. […] When she has a digital bank account […] when she can save one or two dollars a day on her cell phone, she spends it on behalf of her family, on the health and education of her kids, and she also starts to see herself differently, she sees herself as a working woman, and she’ll tell you, her husband sees her differently, if she’s in India, her mother-in-law sees her differently. Her older son sees her differently when she buys him a bike. So it’s not the only tool, but it’s one of the tools that will help empower women.”
As these women-led businesses grow, they serve as a model for other entrepreneurs who aspire to do the same. We can all help accelerate this by supporting women-led businesses and investing in women-focused companies. We have a long way to go, but tech is helping us get there, one innovation at a time.