Why Kamala Harris matters to fintech in the 2020 election

An obscure government initiative tied to Obamacare’s troubled online rollout could position Sen. Kamala Harris, Joe Biden's running mate, as a key figure in modernizing government stimulus and disbursement payments.

The U.S. Digital Service formed with the recognition that government agencies are often lacking in automation, a shortcoming brought to light by the initially dysfunctional Healthcare.gov. The small agency — it generally has had about 200 staffers — has scored successes like a 2018 project that modernized Medicare payments, replacing last-century programming language with application programming interfaces and other payment processing technology as part of a badly needed upgrade.

The USDS also has a big supporter in Harris. As a Democratic senator from California, Harris has called for the USDS’ expansion, a 400% budget increase and its extension to state and local governments. The USDS would make digital wallets out of the Treasury Direct accounts, according to Robert Hockett, a law professor at Cornell University, who has worked on a "digital greenback" proposal that would use USDS to automate processing.

The position shows Harris is aware of the government’s lag in embracing financial automation, and it pairs with other positions Harris has taken to encourage financial inclusion and to increase government payouts during the pandemic.

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Harris and Sens. Bernie Sanders, I-Vt., and Ed Markey, D-Mass., have proposed sending $2,000 per month to most Americans during the pandemic and economic crisis. The government’s handling of the stimulus component of the crisis is faltering on two fronts — the political impasse that’s prevented a deal on new stimulus and the poor performance of government payments during the first round of stimulus checks in the spring.

“The United States has a payments infrastructure issue that delays the dispersal of funds which can be used as part of a stimulus package, unemployment benefit, or entitlement payment,” said Krista Tedder, head of payments for Javelin Strategy & Research.

The new stimulus package does not include provisions to improve payment processing, but Harris’ position on the Democratic ticket provides more momentum for a variety of proposals to digitize government agencies that go far beyond the coronavirus, making government payments technology more of a priority than in the past.

“Presumably such a [monthly check] program would put additional pressure on the Federal government to use real-time payments to credit funds to consumers’ [demand deposit accounts], or perhaps prepaid cards,” said Eric Grover, a principal at Intrepid Ventures. “This also might put pressure on the Fed to accelerate FedNow and bring consideration of a central bank digital currency and digital dollars to the fore.”

There are several proposals to digitize government payments and improve financial inclusion. An early version of the CARES Act included a direct digital connection between Americans and the Treasury. Rep. Maxine Waters and Sen. Sherrod Brown, D.-Ohio, have proposed “digital dollar” legislation.

These moves and momentum toward a central bank digital currency likely won’t help distribute funds if the new stimulus package passes in the next few weeks, but Harris’ influence and general bipartisan support to digitize government payments moves the ball further in a potential Biden-Harris administration.

“Harris has made financial inclusion part of her platform in the past. One of the aims of digital dollars is to bring the unbanked and underbanked into the financial mainstream, so it’s easy to imagine Harris making digital dollars a Democratic differentiator between now and November,” said Jeff Hinkle, content director at Polyient Labs.

Harris' office and the Biden campaign did not return requests for comment. The Trump-Pence press office referred questions to the White House, which did not return a request for comment.

Harris, who is from the Bay Area, has a record that shows broad support for technology development. Harris held fundraisers in Silicon Valley during her primary presidential run before dropping out of the race in December 2019.

The senator has also advocated for net neutrality, a position widely supported by fintechs and other large technology companies that view open access to the internet as a "utility" key to independent development. The Trump administration ended net neutrality in 2017. Harris has taken a centrist position on large technology companies, avoiding issues such as breaking up big firms like Facebook and Apple, while more liberal politicians such as Sen. Elizabeth Warren, D-Mass., have taken a harder line, according to Roll Call.