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In the second part of this election series, Vixio looks at the impact for the payments industry in both potential outcomes, including key areas such as fraud, card fees and crypto-assets.
As the US election cycle ends, voting day is finally upon us. Although many sources have told Vixio the best thing that the financial industry could hope for is a quick result and not days, weeks or months of deliberations, recounts or even court cases, the chances that the eventual winner of the race is known by Wednesday morning are fairly low.
There has been a lot of debate about the economy in the US in this election cycle, and one crucial aspect of that is the financial regulatory space.
In January, the regulatory path diverges: a Kamala Harris presidency would likely continue current financial agendas, although with potential shifts in priorities, but if Donald Trump wins then the US regulatory environment could potentially see a dramatic change.
His first administration was marked with deregulatory action, and sources suggest that unchecked and in his second administration this may be even more pronounced. His vision for the payments sector is unclear at present, but less regulatory oversight or enforcement could have ramifications for the sector.
One New York-based regulatory lawyer said that the result could mean a “huge sea change to how financial regulation works”.
“For the first time in my memory we have a situation where things that one party thinks should be mandatory and absolutely part of the financial fabric of the country, could be prohibited by the other party,” they added.
The future of the regulators
Agencies such as the Securities Exchange Commission (SEC) and the Federal Reserve would face very different futures under Trump, with the former president potentially looking to defang both and even potentially remove the latter’s de-politicalisation.
However, the payments sector is unusual in that it is not dominated purely by financial institutions, but is intertwined with the technology sector, with fintechs not tending to hold balances like banks or funds.
Although Trump’s likely de-regulatory agenda would loosen the system up for the financial sector, there is no telling if there will be as big an impact on fintech or technology, and the payments sector is not reflective of the financial sector at large.
A Harris administration on the other hand would likely see a continuation of Obama/Biden era regulatory safe holds across the industry, and the difference here could have a significant impact on fintech if innovation was either encouraged or throttled.
Not much division?
Sources say the pair are not entirely divided on this topic.
Credit card regulation is hotly debated in the US, with the Credit Card Competition Act (CCCA) dividing merchants, retailers, consumers and issuers about how rewards, interest rates and cap fees should be handled. On this topic there is some convergence between the two candidates.
“The most striking thing, frankly, is that this is an area where there appears to be a lot of agreement,” said Doug Kantor, general counsel at the National Association of Convenience Stores and an advocate at the Merchant Payments Coalition. “Because payments or credit card regulations are not an area where either has put out detailed plans, it is not entirely clear where either would go from January, but there is unlikely to be huge divergence.
“Donald Trump and JD Vance have been very skeptical of big businesses, and the credit card industry in particular, as has the Biden administration,” he said. “This may not be a high profile issue or anybody's headline topic for the election, but it is an area where there is some actual common ground, or at least some shared perspective.”
Vice president nominee JD Vance is also a co-sponsor of the CCCA, although this may be because of the bill’s inclusion of foreign security powers that seek to create a list of potential networks posing threats to the US system.
In the bill introduction, Ohio Senator Vance said: “Working families all over Ohio are getting crushed by inflation every time they go to the grocery store or fill up on gas. Meanwhile, two massive companies have a stranglehold on credit card swipe fees and are increasing the costs of these everyday essentials. This legislation will increase competition in the American economy and drive down prices for consumers.”
Kantor added that antitrust enforcements against big businesses may also span the ideological spectrum. “Both the Department of Justice (DOJ) antitrust division and the Federal Trade Commission (FTC) have been pretty aggressive under Biden, and interestingly, that was true under the Trump administration as well,” he said.
For example, Trump’s DOJ sued to block Visa’s acquisition of Plaid.
The investigation, launched in October 2020, determined a negative impact of such an acquisition. Justice Department antitrust division assistant attorney general Makan Delrahim said at the time, “if allowed to proceed, the acquisition would deprive American merchants and consumers of this innovative alternative to Visa and increase entry barriers for future innovators”.
Harris similarly has little patience for big business or big banks. During her time as attorney general for California she took on the banking industry to massively increase the amount of mortgage relief that those affected by the 2008 financial crisis received, and won to the tune of $20bn.
In this most recent campaign, meanwhile, Harris has been shown support by the likes of Senator Elizabeth Warren, the so-called Sheriff of Wall Street, and shown no apprehension in voicing her dislike for big businesses and the banking industry, with suggestions that corporation tax and taxes on billionaires would grow substantially under her watch.
She has, however, gained the backing of large swathes of Silicon Valley, a fintech hub in the country.
To serve and protect
In both potential administrations, payments regulation is likely to focus on consumer protection, fraud, junk fees and increasing access to real-time payment systems.
Jason Lane, director of government relations at the California Bankers Association, believes that the protection of individuals from scams is another issue that would cut across both parties, going as far as to suggest it is a bipartisan issue and that the legislative environment will be crucial.
“The real question is whether Congress flips or if it stays Republican and who the chairs of the various banking committees are, like the Senate and House Financial Services Committee,” he said. “I expect that folks will be very interested in the increase in payment scams, it's a big issue for both parties.”
Harris, being likely to continue along Biden’s route, is also likely to maintain his focus on "junk fees" and excessive charges made within the payments industry.
Dylan Jeon, the senior director of government relations at the National Retail Federation, suggested that although he does not endorse removing fees imposed for payments charged by banks, known as surcharging, or think it is unnecessary, it is important that the current fee processes are “reined in” and that “what we see as out of control and inflationary fees on merchants” does not get passed on to consumers as well.
Digital assets
Another key factor is each candidate's stance on crypto-assets, particularly stablecoins, which have bipartisan interest.
The crypto industry has typically rallied around Trump in recent years, the strategic lead at one digital asset firm told Vixio, with most placing bets on a potentially easy ride during the next four years.
The Biden administration, under the guise of SEC chair Gary Gensler, has been particularly hard on the crypto sector, despite his prior credentials in the field, whereas Trump was welcoming to the sector and, alongside his supporter Elon Musk, a long-time crypto advocate, would likely do so again.
In September, Trump went as far as to launch his own cryptocurrency venture, World Liberty Financial, an exchange to buy, sell and trade currencies, which is seemingly preparing to launch its own coin imminently.
The topic is garnering a lot of attention from both sides, and a number of bills have been proposed, some bipartisan, to regulate digital assets in various ways, but it is unclear if they will gain much traction under either new administration.
“Trump has had many sound bites about promoting crypto, but he has a lot of sound bites about a lot of things depending on what audience he's in front of, just because he says he is going to do something doesn't necessarily mean he is going to do it,” said Stephen Aschettino, head of payments at Steptoe.
“That arguably applies to all politicians, but the Harris administration has also indicated that it is pro-regulation of crypto as well,” he continued. “To me, it's a bipartisan issue, and it shouldn't matter which party is in the White House, there should be sensible regulation of digital assets and stablecoins.”
