10 ways fintech, payments industry donors are betting on Democrats

October 26, 2020 9:58 AM

The 2020 election could draw the most voters in history, along with a record haul for campaign contributions, with fundraising thus far favoring Democratic candidates both generally and in the finance and technology industries, which cover most financial institutions and payment firms.

Given the pandemic, the economic downturn and the drama surrounding Donald Trump’s presidency, the upcoming election has taken a massive share of attention by at least a couple of metrics. Eighty-three percent of voters say it “really matters” who wins, according to Pew, with 85% of Democrats and 86% of Republicans giving that answer. Just over 10% think conditions in the U.S. will be “pretty much the same” regardless of the outcome.

By comparison, the 2000 election between George W. Bush and Al Gore, which was also dramatic in that it was disputed, didn’t carry the same sense of urgency among voters. The same Pew survey for 2000 found 50% of voters thought it really mattered who won, and 44% thought things would stay the same regardless of who won. And despite the pandemic, Brookings estimates 145 million people will vote in 2020, up from 133 million in 2016 and potentially the largest turnout by percentage of registered voters (65%) since 1908.

We took a look at where campaign money is flowing in the 2020 election for financial services, internet technology and payment companies. These industries skew Republican in terms of employees, according to a survey by Arizent, PaymentsSource’s publisher, though campaign contributions have gone more toward Democratic candidates this cycle. Among retail banks, Joe Biden has outraised Donald Trump, and Congressional donations are evenly split, according to American Banker, another Arizent publication. Among credit unions, Democrats have outraised Republicans by a 59-41 margin.

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Raking it in

The 2020 presidential election is the most expensive ever, according to the Center for Responsive Politics, with the two presidential candidates totaling more than $2 billion and the all all candidates passing $3.5 billion. For all races tied to the 2020 election, the total fundraising is expected to pass $11 billion, or double 2016's total.

Biden has raised $809 million as of Oct. 22 via his candidate committee, and $373 million in outside money from groups unaffiliated with but supportive of his candidacy, such as political action committees. Trump has raised $522 million through his candidate committee and $255 million in outside money. For the entire 2016 cycle, Trump and Hillary Clinton raised about $1.2 billion combined, with Clinton outraising Trump by just north of $700 million to a little more than $400 million.

In the financial services, insurance and real estate sector, Biden has outraised Trump by a $101 million to $60 million margin. Among small independent finance and lending companies, $554,000 has gone to Biden, while $427,000 has gone to Trump. Several of Biden’s rivals for the Democratic nomination have also raised funds from these companies, with Bernie Sanders and Pete Buttigieg each raising more than $100,000 — Democrats overall outraised Trump by a 73 to 26 margin.

Corporate-affiliated financial services donations don’t always follow philosophy and are often hedges to ensure favor with leadership. So the advantage for Biden and congressional Democrats could be a bet on a Democratic victory rather than overt lobbying, a different source of political spending that exists outside of election finance.

A Biden win and a Democratic sweep of the congressional races would result in a stricter regulatory regime, though regarding financial regulation, Biden is more centrist than his Democratic rivals such as Sanders and Elizabeth Warren. In 2016, Clinton raised $117 million in this sector, while Jeb Bush raised $62 million and Trump raised $37 million.

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House candidates have raised just over $1.6 billion this cycle thus far, with Democrats leading Republicans $855 million to $767 million. Senate candidates have raised more than $1.3 billion, with Democrats leading $805 to $534 million.

The larger donations for members of the House Financial Services Committee from the financial services industry went to Republicans. Rep. Andy Barr (R-Ky.) has received more than $55,000, for example, while committee chair Maxine Waters (D-Calif.) has received $1,000. Barr is a strong proponent of leveraged lending and collateralized loan obligations.

Barr has also advocated for payday lenders to access federal funds for forgivable small business coronavirus stimulus lending. Payday lenders overall have contributed about $1.8 million to congressional candidates in the 2020 cycle, mostly to Republicans.

In the Senate Banking Committee, Sen. Mike Crapo (R-Idaho) has received $408,000 from the banking industry, while including Jon Tester (D-Mont.) received $412,000 as the top Democratic recipient. Tester and Crapo have favored rollbacks to the Dodd Frank law. Tester also supports allowing the traditional financial services industry to work with the cannabis industry for banking and payment processing.

Internet policy

Democrats favor net neutrality and skilled worker visas, issues that Silicon Valley companies such as fintechs and payment startups mostly favor. That has helped Biden vastly outraise Trump in the internet sector, according to the Center for Responsive Politics, which reports Biden has received $12 million in campaign donations from that industry, or about $8 million more than Sanders.

Trump did not show up on the site’s list for the internet industry. During the past four years, the Trump Administration has ended net neutrality and has curtailed skilled worker visas. These policies have in some cases made it harder for digital payment firms such as Tipalti to transfer workers already on staff to the U.S.

Facebook

Corporations can’t make direct political donations, so in most cases corporate donation data is for affiliates, PACs or “soft money” donations that aren’t directly tied to or controlled by the candidates. Facebook in 2020 steered about $3 million toward Democrats and less than $800,000 toward Republicans, keeping a ratio that’s been in place for the past several national election cycles.

Facebook receives political pressure from both sides of the aisle over a variety of issues such as privacy, security and political advertising.

Facebook is also affiliated with the Libra stablecoin project, which has faced opposition internationally due to concerns about its impact on central bank-driven monetary policy. The company’s political donations are likely less about specific policy than about the tendency of Silicon Valley to lean liberal politically.

Mastercard

The card brand has donated about $452,000 during the 2020 cycle via PACs and individuals, with $308,000 going to Democrats and $140,000 going to Republicans, a wider ratio than the 2018 midterm cycle, when it donated $234,000 in donations to Democrats and $192,000 to the GOP.

Mastercard has thus far donated less in 2020 than in 2016, when it donated $347,000 to Democrats and $265,000 to Republicans.

While credit cards are regulated in a variety of ways, arguably the largest issue impacting the card industry is interchange fees and the Durbin Amendment to the Dodd-Frank law that followed the 2008 financial crisis. That measure governs debit card routing and placed heavier restrictions on the networks.

Mastercard has also received help from U.S. politicians, who have placed pressure on countries such as India over regulations that require foreign companies to store data locally. The card brands would also likely benefit from larger cross-border payment flows if the trade war were to wane and U.S. relations with China improve.

Visa

Visa’s PAC-affiliated donations during the 2020 cycle have totaled $406,000 thus far, favoring Republicans by a 54-46 margin.

These donations include $10,000 each to Rep. Nancy Pelosi (D-Calif.), the House speaker; Sen. Mitch McConnell (R-Ky.), the Senate Majority Leader; and Sen. Cory Gardner (R-Colo.).

Gardner is one of the Senate’s strongest advocates for cannabis legalization, and one of the few Republicans to take a strong stance on legalization. National legalization would make it easier for banks, and thus Visa and Mastercard, to support transactions for cannabis dispensaries.

PayPal

PayPal's staff and affiliates have donated about $103,000 so far this cycle, with 53% of that going to Democratic candidates and 47% going to Republicans.

The payment company has made $10,000 donations to Democratic and Republican Congressional and Senatorial committees, as well as the Congressional Black Caucus, the Committee for Hispanic Causes, and the Electronic Transactions Association.

There’s also a $3,500 donation to Perlmutter for Congress. That’s Ed Perlmutter (D-Colo.), who — like Gardner — is a proponent of cannabis legalization, a major industry in Colorado. PayPal has also supported Perlmutter’s efforts via lobbying for legal cannabis deregulation. More mainstream acceptance of cannabis retailers would open an additional revenue stream for PayPal.

Amazon

Amazon is one of the largest sources of corporate-affiliated donations, with more than $7 million in donations for the 2020 cycle, mostly through employees or other people affiliated with the company.

These donations point to a big bet on Biden, who accounts for more than $924,000, compared to $105,000 for Trump. There's also $182,000 for Andrew Yang, a Silicon Valley-friendly former Presidential candidate who has remained a visible part of the Biden campaign as a surrogate. Amazon's average donations for House candidates are just over $4,000 for Democrats and $3,000 for Republicans. In the Senate, the average is $15,000 for Democrats and $3,000 for Republicans.

Like Facebook, Amazon faces regulatory and Congressional pressure on a variety of fronts, including claims of monopolistic practices. It's also indirectly impacted by bipartisan legislation that mandates cash access at stores. Amazon Go has already added cash access in response to state laws mandating cash access.

Square

Square's affiliates have made $556,000 in donations so far, with Biden being one of the top recipients at $76,000. Trump does not show up on Square's donation page.

The payment company is also tied to a $50,000 donation to Tech for Campaigns, an organization that places volunteers and resources with progressive political campaigns and initiatives. Tech for Campaign's volunteers include staff from technology firms such as Khan Academy, Waymo, NerdWallet and Stripe.

Square's donations additionally include $13,000 to Amy McGrath, a Democrat who is challenging McConnell to represent Kentucky in the Senate. McConnell is leading in the polls, but a loss would remove one of the most influential Republicans in government.

Apple

Along with Google, Amazon and Facebook, Apple has been the subject of the congressional investigation into possible unfair impacts on competition. Part of the contention is how these companies control access and distribution, an issue that often comes up with how Apple Pay guards access to its NFC technology and negotiates with banks.

The claims are bipartisan, though there are differences between Republicans, who favor stronger antitrust investigations, while Democrats are pushing for business line separation — a move opponents see as a prelude to breaking up the companies. Such a move would hinder Apple's diversification deeper into payments and financial services, since it relies on its breadth of services and scale.

These issues do not directly correlate to Apple-affiliated political donations, which have gone toward candidates who would likely favor heavier regulation. The company is tied to more than $4 million in political donations this cycle, with Democrats getting the lion's share of the money.

About $652,000 went to Biden, and another $387,000 to Bernie Sanders. The top conservative-leaning donation went to the Republican National Committee, which received $167,000.