Trump vs. Biden: 10 ways the 2020 election could change fintech

September 21, 2020 12:01 AM

The Republicans and Democrats have drastically different philosophies on the role of government in stimulus, globalism and access to web technology. President Donald Trump has made issues such as skilled worker immigration, remittances and Chinese digital commerce part of his political program, often creating controversies in other countries that could impair the ability of U.S. companies to execute transactions across borders.

Trump’s challenger, former Vice President Joe Biden, is more centrist when it comes to financial regulation than Democratic primary challengers such as Bernie Sanders and Elizabeth Warren, though Biden’s general election campaign has incorporated some progressive ideas inspired by his former party rivals.

The pandemic and subsequent economic crisis have raised the stakes, since the government’s role in recovery and how stimulus is delivered — and policies impacting the goals of card and technology companies — will be largely determined by the philosophy of leadership.

Card wars

A man reaches for a door advertising acceptance of VISA and MasterCard at Gnomon Copy in Cambridge, Massachusetts on Wednesday, October 11th. Visa, the world's largest credit card organization, plans to sell shares in an initial public offering after rival MasterCard Inc.'s stock surged 84 percent in the 4 1/2 months since its IPO. PHOTOGRAPHER: JB REED

Part of the U.S. political fight is playing out in China. Trump has taken a hard line on China, sparking a battle that’s influenced how companies such as Mastercard, Visa and American Express move on plans to build a domestic payment market inside China.

The U.S. card brands for years have wanted to access China’s huge market, but China’s own protectionist policies have moved the goal posts. There was some movement on China’s part earlier in 2020 toward approvals — ostensibly tied to a preliminary U.S.-China trade deal — but the language was vague and final approvals are still pending. And the trade dispute between China and the U.S. rages on.

If Trump wins a second term, the fate of the U.S. card brands’ push will be tied to Trump’s posturing toward China, often involving issues not directly related to credit card processing yet still creating an adversarial atmosphere that could cloud negotiations.

Biden’s position on China is not dramatically different, as the former vice president contends China unfairly funds Chinese companies and discriminates against U.S. firms. Where Biden differs is in opposition to Trump’s tariffs, and in his calls for a group of U.S. allies to pressure China on trade policy. A coalition could change how U.S. companies approach China, potentially using the scale of partner markets in the region.

Less levy

Signage hangs outside the Office of the U.S. Trade Representative in Washington, D.C., U.S., on Wednesday, Aug. 14, 2019. The Trump administration announced today it will delay until mid-December the 10% tariff on some Chinese products on many holiday-shopping lists, with the president acknowledging that the levies would have hurt consumers. Photographer: Andrew Harrer/Bloomberg

Andrew Harrer/Bloomberg

For the payments industry, the biggest trade policy difference between Trump and Biden is tariffs. Biden’s criticism of Trump’s tariffs suggests he would ease or remove them as president, and thus diminish one of the central themes of Trump’s presidency. Trump has levied or threatened multiple tariffs of varying sizes repeatedly, often as a way to sell American isolationism to a domestic political audience and to rail against globalism and free trade.

These tariffs have often involved countries beyond China, such as France, which imposed a tax on U.S. technology firms with e-commerce interests such as Amazon.

Biden's position of lowering the temperature on tariffs would be a big change for international supply chains and subsequent B2B payment flows, since it would remove the issue from negotiations for supply chain deals.

Data

Tencent Holdings Ltd.'s WeChat application is displayed on an Apple Inc. iPhone in this arranged photograph in Tokyo, Japan, on Friday, Dec. 28, 2012. Tencent, founded in Shenzhen in 1998 with an instant-messaging service called QQ, started its QQ Game Portal in 2003. For the past decade, online games such as "Dungeon & Fighter" and "Cross Fire" propelled Tencent's growth and contributed 56 percent of revenue in 2011. Now, casual gaming on smartphones and tablets is eating into the growth of gaming on PCs. Photographer: Tomohiro Ohsumi/Bloomberg

Tomohiro Ohsumi/Bloomberg

Trump issued a ban on WeChat in the U.S. and TikTok as part of a larger battle with Tencent and ByteDance, the two apps' China-based parent companies. It’s possible the TikTok divestiture, which is tied to the TikTok ban, will be complete or at least resolved before the November election, but the issue of data storage and the use of "data privacy" as cover for protectionism will linger.

Trump’s pressure on ByteDance to sell TikTok is part of a global trend toward requiring localized data storage, a trend that could increase expense for payment firms processing in different markets, including India and China.

Trump’s TikTok order, and similar pressure the administration has placed on WeChat, is based partly on data security, or the concern the Chinese government or other authorities could misuse information on U.S. consumers.

The WeChat ban, which includes a ban on WeChat payments in the U.S., could spark a revelation from China that would spill into a potential Biden presidency. Just before the ban was to go into effect, a federal court issued a preliminary injunction.

The ByteDance would likely not fall on Biden’s desk. As for data privacy as a general issue, Biden has expressed support for an American version of GDPR, the European data protection law.

Firms that do business in Europe have struggled to comply with GDPR, and a similar or stronger rule in the U.S. would potentially create more compliance expenses.

Facebook, Libra and crypto

People are seen as silhouettes as they check mobile devices whilst standing against an illuminated wall bearing Facebook Inc.s logo in this arranged photograph in London, U.K., on Wednesday, Dec. 23, 2015. Facebook Inc.s WhatsApp messaging service, with more than 100 million local users, is the most-used app in Brazil, according to an Ibope poll published on Dec. 15. Photographer: Chris Ratcliffe/Bloomberg

Chris Ratcliffe/Bloomberg

The story of Libra, the Facebook-affiliated stablecoin project, has largely been a tale of politics, drawing constant and often hyperbolic protests from around the world, mostly tied to the perceived threat of the project to central bank monetary policy and the easy target Facebook is for politicians.

Trump has weighed in on Libra, calling it "unAmerican" and suggesting Facebook apply to become a licensed bank. There's not a reliably predictable red-blue divide on Libra, since Trump's criticisms of Libra aren't that much different than Rep. Maxine Waters, D-Calif., who has called for a ban on financial licensing on large technology companies like Facebook.

In the Presidential race, Libra is often intertwined with other Facebook-related controversies, such as fights over political advertising and fact-checking other political content on social media.

Trump's position on cryptocurrency in general has waffled, but for the most part the president has taken a harsh stance toward cryptocurrency. Former national security advisor John Bolton claims Trump wanted to "go after" bitcoin as part of a broader discussion about trade policy and tariffs. Trump has also said cryptocurrencies "aren't money."

Biden has not had a lot to say about cryptocurrency, though he solicits donations in cryptocurrency and has not taken an overly negative view.

Following a recent Twitter attack on accounts tied to celebrities that asked for fraudulent bitcoin donations, Biden said he "did not own" bitcoin but did not say anything negative about crypto.

Net neutrality

Ajit Pai, chairman of the Federal Communications Commission (FCC), speaks during an open meeting in Washington, D.C., U.S., on Thursday, Nov. 16, 2017. The FCC plans to vote in December to kill the net neutrality rules passed during the Obama era. Photographer: Zach Gibson/Bloomberg

Zach Gibson/Bloomberg

Biden has promised to restore net neutrality if elected, taking the same position as his former boss, President Barack Obama, and a view shared by most large technology companies.

Under Trump, the FCC eliminated net neutrality, which had been an issue during the 2016 presidential race. Proponents of net neutrality said it equalizes access to the internet, and thus encourages development of new apps and also fuels the third-party development that large payment companies like PayPal and the card brands rely on to spot new innovation early on.

The argument against net neutrality is that it's against the business interests of internet service providers to provide lower-grade service to certain customers, and ending net neutrality encourages investment in expanding internet access.

Digital dollar

/fablok - stock.adobe.com

The initial stimulus package for coronavirus relief briefly included a Democratic-led proposal for digital dollars, an adaptation of a long sought method to directly send funds to Americans.

The digital dollar did not wind up in the final stimulus bill, and there were problems with the direct payments that resulted, partly because more than a third of Americans do not have direct deposit established with the IRS. The problems have given new life to the concept of a central bank digital currency, or digital government payments, but there's differences between Democrats and Republicans that will determine how a future digital dollar will work.

A Biden presidency and Democratic controlled Congress would favor a more direct link between the Federal Reserve and consumers, via a public P2P app or a digital dollar. The Republicans favor a role for banks as an intermediary to distribute the funds. Divided government would likely ensure a continued stalemate.

In the mail

A pedestrian walks past a U. S. Postal Service mailbox in New York, U.S., on Thursday, June 23, 2011. The U.S. Postal Service, facing insolvency without approval to delay a $5.5 billion payment for worker health benefits, will suspend contributions to an employee retirement account to save $800 million this year. Photographer: Timothy Fadek/Bloomberg

Timothy Fadek/Bloomberg

The cost of maintaining cash has become a challenge for banks globally, with countries such as the U.K., Australia and Italy turning to the postal service to ensure access to cash in underserved areas.

A "unity" Biden campaign document prepared with Sen. Bernie Sanders, I-Vt., calls for the Postal Service and Federal Reserve to support government-led banking functions. That would run counter to the Republican view, which would be prone to support proposals such as JPMorgan Chase's attempt to lease space in post offices to offer ATMs and other branch services.

The Biden-Sanders document and the JPMorgan Chase proposal both present a much different potential future for the USPS than what Trump has indicated. Trump referred to the Postal Service as a "joke" and has drawn the postal service into a battle over mail-in voting.

Veep

Senator Kamala Harris, Democratic vice presidential nominee, speaks during the Democratic National Convention at the Chase Center in Wilmington, Delaware, U.S., on Wednesday, Aug. 19, 2020. Harris's prime-time speech is the first glimpse of how Joe Biden's campaign plans to deploy a history-making vice presidential nominee for a campaign that has largely been grounded by the coronavirus. Photographer: Stefani Reynolds/Bloomberg

Stefani Reynolds/Bloomberg

Joe Biden's vice presidential pick, California Senator Kamala Harris, has closer ties to the technology industry than Biden, Trump or Vice President Mike Pence.

Harris is seen as a moderate on "big tech" issues, or even an ally, suggesting her influence could result in a relatively easier path for firms like Alphabet, Apple and Silicon Valley fintechs that have spent the past decade building mobile wallets and making e-commerce investments.

Harris has also advocated expanding government investment in digitizing government services, which could advance automation for government programs that include payments, such as the Affordable Care Act.

Immigration

U.S. President Donald Trump speaks to members of the media before boarding Marine One on the South Lawn of the White House in Washington, D.C., U.S., on Wednesday, Aug. 21, 2019. Trump said he canceled his trip to Denmark after a "nasty" comment by the countrys prime minister. Photographer: Andrew Harrer/Bloomberg

Andrew Harrer/Bloomberg

Trump has made a series of moves to curtail immigration, having a direct impact on payment processors.

A recent executive order restricting H-1B and L-1 visas made it harder for U.S.-based payment companies such as Tipalti to relocate workers from outside the U.S. H-1B and L-1 visas often cover technology workers such as programmers and engineers, the talent lifeblood of fintech, payment and cross-border e-commerce companies.

Other Trump orders on immigration pushed payment companies to hire more freelancers to serve in non-U.S. roles. That created payment flows for processors in the gig economy as part of the fallout.

Biden has said he would reverse the skilled worker visa restrictions if elected, making it easier for U.S. firms to hire programmers from other countries but potentially cutting into the new line of business for the gig economy processors.

Remittances

A U.S. Customs & Border Protection (CBP) vehicle next to the U.S.-Mexico border wall in San Diego, California, U.S., on Tuesday, Aug. 25, 2020. The Department of Homeland Security announced this month the U.S. reached an agreement with Mexico to limit all non-essential travel across the border with the measure extending until September 21 because of the coronavirus pandemic. Photographer: Bing Guan/Bloomberg

Bing Guan/Bloomberg

One of Trump's most direct threats to a specific type of payment has been his links of remittances and the Mexican border wall during the 2016 election cycle.

Earlier in his presidency and in the 2016 campaign, Trump threatened to "ban" remittances to Mexico to force Mexico to pay for the border wall. The remittance ban never came and the wall remains largely unbuilt.

Remittances came up again recently, with Trump suggesting a "toll" for cross-border traffic would in effect push Mexico to pay for the border wall. He also suggested a new tax on remittances.

Since Biden is opposed to the border wall, he'd have no reason to use the Mexican remittance corridor as a forcing mechanism. Biden has called for an easing on restrictions to remittances to other Latin American countries such as Cuba.