Personal Finance: Fintech Apps Like Robinhood Are Leaving Women Behind

Technology was supposed to broaden access to financial services and help eliminate economic inequalities. But so

Technology was supposed to broaden access to financial services and help eliminate economic inequalities. But so far the explosion of banking and investment apps has failed to narrow one persistent divide: the gender gap in financial inclusion. Policy makers should take note. In the post-pandemic recovery, they cannot entrust the market forces of fintech to support female economic empowerment.

There are many ways in which women’s financial inclusion lags that of men. They own fewer assets than men, for example, but they are also less likely to invest in riskier, higher-yielding assets, such as equities. A 2019 analysis by Germany’s Comdirect, which offers online stockbroking, showed that for every female investor on the platform, there were three male counterparts. Robinhood Markets Inc., the U.S. trading app that took the stock market by storm this year, reports that women make up roughly 30% of its active customers.      

One frequently given explanation for these differences in investing is that women have lower financial literacy. But recent studies suggest that even if women on average are less familiar with the jargon and intricacies of financial products, this only partly accounts for the gender gap in financial participation. 

Using data from the Dutch central bank, an April paper from the National Bureau of Economic Research shows that confidence also plays a role. When answering multiple-choice questions about finance, women were more likely to choose the “do not know” option than men. But absent that option, women often got the answer right, narrowing the gap in financial literacy substantially. In fact, the researchers concluded that as much as one-third of this gap can be explained by lacking confidence.

Another study found that attitudes toward tech and pricing can also make a difference when it comes to adopting financial tools. Using data from a survey of 27,000 people across 28 countries, a working paper from the Bank for International Settlements showed that 29% of men reported using fintech products and services compared with 21% of women — a gap of 8 percentage points, similar to the divide in traditional bank account ownership.

The gap persisted among respondents who lived alone, undermining the idea that women leave money decisions to male partners. It also held among people who are employed and have multiple financial accounts, suggesting the gap wasn’t due to not having funds or being unfamiliar with financial services. 

The researchers found other differences, however, that can help explain it. Women appeared less comfortable with sharing data and less interested in cheaper offerings. Women were also less willing to try out a fintech bank even if it offered a product better suited to their lifestyle. Strip out these differences and the gap in fintech adoption narrows from 8 to just over 2 percentage points.

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