President Donald Trump's signing of an executive order Wednesday to push forward with plans for a "security wall" between the U.S. and Mexico has strong implications for how the plan will affect cross-border payments.
Trump in the past has suggested shutting off remittances between the U.S. and Mexico — one of the busiest corridors in the world — as a way to pressure Mexico to pay for the border wall. The proposal was widely panned at the time, as financial services experts doubted the plan could be executed politically and logistically, and contended it would hurt U.S. businesses.
Remittances are not a main part of Wednesday's action from the administration. Trump's executive order was part of a series of moves planned to address immigration; those plans would also place limits on refugees from certain nations and establish a national biometric program for non-citizens entering and leaving the U.S.
Most media outlets, such as The Guardian and The New York Times are reporting the Trump administration will cull through current U.S. aid packages to divert money to build the wall, with pressure applied to Mexico later to pay for the wall. As of Wednesday morning, it was still unclear which parts of the plan would require Congressional approval and how long that would take.
Redirecting Mexican aid would give Trump some political cover, since Mexico would be indirectly paying for the wall. But Trump has long promised to force Mexico to pay for the wall's construction, and altering aid packages may not be enough to cover costs, nor would it be an exact fulfillment of the campaign pledge.
"I don't think remittances are off the table here," said Richard Crone, a payments consultant. "Once you have a gate you can be a gatekeeper and can exact a toll anywhere along the commerce line. Financial services is not a sacred cow."
The fluid nature of the administration's plan demonstrates the difficulty of using a financial service as leverage for an unrelated global policy, according to Julie Conroy, research director at Aite Group.
"I do think that using a financial instrument as part of political policy is incredibly complex, given the vast number of stakeholders, the patchwork of federal state and international regulation to consider, and the potential for unintended consequences," Conroy said. "I think we saw that illustrated with Operation Chokepoint a couple of years ago, and cross-border remittances are even more complex, given the stakeholders are spread across multiple countries."
The wall was a signature of Trump's presidential campaign, a structure he said would curtail illegal immigration from Mexico that would be funded by the Mexican government. The Mexican government has consistently refused to pay for the wall, requiring other sources of funding in order for Trump to maintain his campaign pledge.
The funding would have to be substantial. While the administration has not yet released specifications for the wall, Business Insider pegs the cost at as much as $25 billion, citing analysts at Bernstein.
The administration's biometric ID proposal could also have a large impact on the security industry, and subsequently financial services risk strategies. A national biometric ID program would funnel substantial money to biometric companies, which are already pushing the security method as a replacement for passwords for bank and payment apps. A large biometric program could elevate biometrics as a security method over static methods.
"This could lead to an enactment and requirement of multi-factor authentication with the mobile phone being the new hardware," Crone said. "The government would not have to pay for any new hardware in that case."
Biometric technology is already being used for border control, Conroy said, adding it's a central part of many countries' existing border controls, including the U.S.
"I think the confluence of this use case and consumer devices like Apple's Touch ID have brought biometrics into mainstream awareness and adoption," Conroy said. "This is certainly a factor in the increasing biometrics use we're seeing for a variety of financial services."