Oh, the irony.
It took an initiative by one of the largest corporations in finance to put inclusion and diversity in fintech into perspective and highlight the extent of conservatism in the startup scene and how opportunities are still open primarily to the privileged few.
Morgan Stanley, by way of its Multicultural Innovation Lab, is specifically interested in fintech startups with multicultural senior management teams and C-level executives. Firms led by people belonging to minority groups will have the chance to join the Innovation Lab in New York and work on their disruptive ideas and projects. Of course, this lab is also the perfect opportunity for the bank to deepen its connection with the startup scene and drip-feed innovation into its corporate blood by assessing and possibly adopting the new technologies it incubates.
On top of all of that, the selected startups will be given $200,000 each to help set their ideas in motion.
We live a time of Donald Trump, Brexit, and mostly closed European doors to civil war survivors, so this initiative was enthusiastically greeted by those who never tire of stating the obvious: that inclusion and diversity—in terms of race, gender, culture and sexual orientation—in business helps build equal societies, and can also become the catalyst for a firm’s operational and financial growth and success.
But before we celebrate, let’s take a step back and think for a minute. Why would a multi-billion dollar global corporation take this initiative? For image and brand-building purposes? Probably. For political reasons? Possibly. Or maybe it found a gap in the startup scene and it stepped in to fill it? But if that gap is racial diversity, then we have a problem. A serious problem.
The tech sector is supposed to be one of the most progressive industries in the world. You simply cannot think out of the box and build innovative solutions with your mind stuck in the 19th century. That’s one aspect of tech-savvy people I have always admired—their progressiveness, open-mindedness, creativity, and sense of duty to change the way things work.
To my surprise (and disappointment), I recently came to the realization that in fintech, things are not as disruptive as I originally thought. Not tech-wise—I still trust the industry’s big ideas in that respect—but in terms of culture and mindset, where I believe fintech startups are miles away from being truly innovative.
Multiple studies have shown that the rusty archetype of a homogenous corporate-style management team remains the preferred choice of the organizational structure of most of these firms.
For example, an internal paper by the Center for Financial Services Innovation (CFSi) published in January this year revealed that diversity numbers among startups created shockwaves throughout the industry. The paper, written by CFSi’s Asad Ramzanali and Josh Sledge, states—among other things—that there are black and Latino CEOs in fewer than 1 percent of venture-backed fintech startups in the US. Also, the overall percentage of represented minorities (African Americans, Latinos, Asians and Native Americans) in the startup workforce did not exceed 30 percent.
In the UK, a 2015 study on diversity conducted by startup accelerator Wayna said that in its yearly review, it was twice as likely to find a C-level executive from an ethnic minority in a UK fintech startup compared to the US. Still, the numbers remain undeniably and overwhelmingly low.
It goes without saying that people from different backgrounds introduce unique perspectives, and that blend can mean the difference between a disruptive solution and one that is simply new. Morgan Stanley has played a card that (apparently) nobody else has played before, which should be seen as something of a stain on fintech startups.
It’s something that I believe they need to ruminate on and start acting the way they are supposed to: like a real, disruptive and innovative community.