As Trump and Biden battle it out, the fintech agenda remains in flux
As the presidential voting count waged deep into the night on Tuesday, the fate of fintech, financial services and payments regulation hung in the balance.
As of early Wednesday, neither candidate had reached 270 Electoral College votes, with races in key states such as Pennsylvania, Michigan and Wisconsin still undecided.
While the presidential vote counting continued, Democrats retained control of the House of Representatives while the Senate balance was unclear.
Even before election day, the results of the presidential election were not expected to be final on Tuesday, mostly due to the huge volume of mail-in ballots and early voting, which rivaled total overall vote counts for prior elections.
Any short-term delay in the election results is not likely to cause overt harm to payment systems, provided the battle over the outcome is not subject to uncertainty or additional dispute. While the financial services industry is traditionally conservative, both sides in this cycle have predicted some sort of split government while preferring a full victory for their party.
“I would say while election uncertainty for a month or so would be unfortunate, what matters is who’s ultimately in the White House, who’s running the administrative state, and who controls Congress,” said Eric Grover, a principal at Intrepid Ventures.
A more prolonged delay — or a dispute over the results — could shake confidence inside the banking, card and payments industries, potentially delaying initiatives and tossing more uncertainty into an tepid recovery from the coronavirus and the subsequent economic crisis.
“We would be in a bad place for a lot of reasons if the delay is so great as to start disrupting the normal day-to-day government business,” said Matthew Kopko vice president of public policy at DailyPay, in an email. “Typically rulemaking is years in the making, so they can sustain a couple of months of delays. It would have to be a fundamentally contested election if it is to take months to resolve.”
The election took place against the backdrop of the coronavirus pandemic and the accompanying economic crisis, which became the primary issues during the presidential race and will play a large role going into 2021. Early attempts to stimulate the economy have been mixed, as the Paycheck Protection Program provided a lifeline for small businesses while direct payments of stimulus checks had a mixed result in the spring.
A new stimulus package has not been passed, and most of the discussions about additional stimulus have not directly addressed the issues of inefficient government payments. There will likely be some form of digital government payments in the year ahead, but the details and the role of private industry still have to be hammered out.
The financial services industry's political preferences are mixed. While financial professionals lean conservative, a higher amount of campaign donations during the 2020 cycle went to Democratic candidates. Silicon Valley and the technology industry, which covers fintech and payment app developers, tend to lean liberal.
Writing for PaymentsSource, Kopko said a Biden victory would move the balance of power to the federal government for fintech regulation, reversing a trend over the past few years in which the states have taken the lead.
During Trump’s term, the Consumer Financial Protection Bureau came under nearly constant pressure, and restrictions on payday lending have been rescinded, benefiting an industry that has long been controversial. This, in turn, sparked alternative early-payroll products such as earned wage access apps.
Trump’s isolationism has defined U.S. international politics for the past four years, with a profound impact on U.S. industry, including many companies that operate in e-commerce or have ambitions to that end. Pressure from the Trump administration scuttled China-based Ant Group's deal to acquire MoneyGram, amid the many steps Trump took that created headwinds for U.S.-China business.
Trump’s attempts to ban or restrict TikTok and WeChat in the U.S. could hinder the e-commerce strategies of those companies, and thus their payment revenue. It also sets up a potential retaliation against U.S. companies with ambitions in China such as Mastercard, Visa, American Express, PayPal, Starbucks and others.
The trade dispute between the Trump administration and China has also created challenges for parts of the payment industry, with stresses on B2B transaction flows as some goods became more expensive. Biden takes a similar adversarial approach to China, though he's said he would prefer to work more in concert with other nations in the region to pressure China on trade — a move that would likely not include Trump’s tariffs.
The 2020 presidential election drew attention to the dramatic differences between Biden and Trump in terms of governing style, policies, ideology and demeanor. It’s a division between Biden’s favor of traditional incremental governing policy — with a moderately left-of-center goal — and Trump’s strategy to put conflict forward as negotiating leverage.
For fintechs and the payments industry, that style has been apparent during Trump’s presidency. Trump has used financial services as a wedge to push other policies. His threat to ban remittances to Mexico to force Mexico’s government to pay for a border wall never came to fruition, nor did the full length of the border wall.
But given Biden is opposed to the wall, and thus would never make such a threat to a specific financial service to fund something that doesn’t fully exist, the issue is emblematic of the wide gap between the two candidates. In this case, one candidate’s policy was so outside the traditional norm that the challenger’s agenda could not produce a plausible counterproposal.
Immigration is another example. While largely a second-tier issue compared to family separation for asylum seekers at the Mexican border and Muslim travel bans, Trump’s immigration restrictions have also hit the technology industry. It’s hard to imagine a U.S. payment technology company unable to transfer an existing international employee to the U.S. under Biden’s immigration policy, given a prevailing Democratic bent toward more open immigration as opposed to Trump’s hard line on immigration, highlighted by the border wall and restrictions on skilled worker visas.
That distinction is also apparent in digital policy, as Biden supports restoring net neutrality while the Trump administration has ended the practice. The difference impacts a wide range of other policies that govern how developers access the internet to build new applications and businesses. A more open internet also makes it theoretically easier for larger companies, such as PayPal and the card brands, to reach out to developers building new payment technology.