5 ways Trump could disrupt the payments industry

Published
  • November 10 2016, 11:47am EST
Trump's election raises a lot of issues for the financial services industry, particularly for companies that operate internationally or rely on emerging technology. Here are a few areas Trump's presidency is likely to disrupt.

Trump's election raises a lot of issues for the financial services industry, particularly for companies that operate internationally or rely on emerging technology. Here are a few areas Trump's presidency is likely to disrupt.

Traditional money transfers

Trump's plan to pressure Mexico to fund the construction of a border wall has one big, disruptive bargaining chip: remittances. In April, Trump revealed that he would cut off transfers between U.S. and Mexico if the country did not agree to his plan. Traditional money transfer providers like Western Union and MoneyGram would be the hardest hit, but the mandate could affect the broader U.S. economy; the U.S. is the biggest sender of remittances worldwide.

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Global P-to-P

The border wall plan could have the opposite effect on digital payment companies, such as PayPal, since they can facilitate transfers without the need for an agent or store across the border. Person-to-person transfers between two U.S. bank accounts could look like domestic payments even if one of the parties is outside the U.S.

Net Neutrality

Net neutrality refers to the treatment of the Internet as an impartial utility, which bars Internet service providers from setting up tiered lanes that favor access based on pricing or other factors. Trump has compared net neutrality to the defunct Fairness Doctrine, stating that net neutrality would allow parties to target conservative content on the Internet. Fintech firms fear that if anti-net neutrality sentiment grows in the U.S., it could lead to the kind of uncertainty already plaguing the U.K., where British fintech companies were hard hit following the Brexit vote. In addition to open source, much of the current innovation in payments is geared toward cross-border transactions, using blockchain and cloud technology to ease execution and erase artificial borders. The idea that there may be even a digital wall built around the U.S. could further chill the market.

Open development

The elimination of an open Internet would stifle fintech firms, a large portion of which rely on open source development or technology toolkits that decentralize innovation, allowing businesses to become payment companies with minimal coding. A significant amount of money has already poured into this market, notably PayPal's transformative $800 million acquisition of Braintree, the development platform used by Uber, Airbnb, OpenTable and TaskRabbit. In other words — without an open Internet, there would be no Uber.

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Regulation

Trump has taken numerous shots at Sen. Elizabeth Warren, D-Mass., the founder of the CFPB, but has not specifically addressed the agency itself. Most political observers believe Trump would be open to Republican efforts to dismantle or change the agency — but the president-elect has not endorsed such a plan.