President-elect Trump has shown little interest in technology beyond social media, but several of his policies could significantly affect the decisions banks and their tech vendors make about tech.
There are a few positives and several downsides, especially for those who care about data privacy. Here is a quick rundown.
Tech costs could fall under the Trump administration's tax policies. Some Republicans want to let companies fully expense tech purchases in the first year.
"So if you're a bank and you buy a new computer or ATM machine, you write that off in the first year," explained Robert Atkinson, founder and president of the Information Technology and Innovation Foundation, a think tank in Washington. "We think that's the better position for spurring investment and Trump has endorsed that."
Trump's plan for reducing taxation of foreign-source income will benefit larger and older tech companies that banks buy from.
"The Apples, Googles, and Facebooks of the world have a lot of money parked overseas because if they bring it back, it's taxed at 35%," Atkinson said. "Trump and the Republicans support taxing that income at a 15% rate with no deferral. On net, that would be a good thing for tech industry." Tech companies would also gain from Trump's proposed 15% corporate tax rate, though Democrats are likely to fight that. "It's possible to get a rate down to the low to mid 20s," Atkinson said.
Trump's support for government surveillance will conflict with efforts to protect data privacy. Trump has said he would have favored the FBI in its battle with Apple over unlocking the smartphone of one of the San Bernardino shooters. "I assume when I pick up my telephone, people are listening to my conversations anyway, if you want to know the truth," he has said. "It's pretty sad commentary, but I err on the side of security."
Trump has also stated that he wants to fully restore the Patriot Act, including more support for government surveillance. Many in Congress, including Republican Sen. Rand Paul of Kentucky, will push back, Atkinson said. "I think Trump wants it but won't get it," he said.
The president-elect has also indicated support for the Burr-Feinstein bill that mandates that tech companies provide so-called back doors to their products, giving law enforcement access. However, here again, civil liberties stalwarts like Sen. Ron Wyden, D-Ore., will fight back.
This will to allow government agencies to spy on citizens — and Trump's control over the Foreign Intelligence Surveillance Courts that make decisions in secret — puts at risk tech companies' and, for that matter, banks' ability to protect their customers' data.
David Weiss, senior analyst at Aite Group, said that banks and other companies don't want to be put in the middle between government agencies and customer data. But he also expects more pushback from companies like Apple. "I wouldn't be surprised if somebody makes an argument that encryption itself is freedom of speech," he said.
Financial tech companies will get even less federal funding than they do today.Trump has said he wants to direct funding to current challenges, such as infrastructure, rather than future-oriented research.
Tech companies don't receive a lot of federal funding today, but they do get some. Some fintech startups get Small Business Innovation Research grants. In-Q-Tel, a venture capital firm based in Arlington, Va., that invests on behalf of the CIA, backs some Silicon Valley startups and early stage companies. This money could be at risk.
But the bigger effect would come through academia. Many tech startups spin off from or rely on technology that comes out of universities like Stanford.
"If there are cuts in federal support for research and engineering, which I believe there will be, you'll see less funding from the federal government for that," Atkinson said. "That will take a while to work its way through the system. We're not going to notice it for three or four years -'hey, how come there are fewer tech startups? What's going on here?'"
On the other hand, some hope that Trump's interest in helping businesses will extend to fintech startups.
"Even now, the U.S. government could be doing more to support the fintech ecosystem, especially compared to some of the more progressive trade bodies and regulators of the U.K., Singapore, Canada, Hong Kong, and others," said Jon Zanoff, founder of Empire Startups, a fintech startup community in New York and San Francisco. "The new administration must recognize that collaboration is critical to innovation, and any shift to become more insular would significantly impede U.S. entrepreneurs."
There are signs that Washington is moving in a more fintech-friendly direction. Republicans in both chambers are already pushing bills that would modify the regulatory structure to help new fintech firms gain ground.
Trump's anti-regulation stance could put a damper on the burgeoning "regtech" market. Trump vowed during his campaign to "undo" the Dodd-Frank Act. His business-friendly, regulation-lightening platform could slow growth for the recently anointed "regtech" sector that provides compliance solutions to banks, often based on artificial intelligence. This niche includes young tech firms (Palantir, Digital Reasoning) and household names (IBM with Watson).
"He's talking about getting out of the way, he's anti-regulation," Weiss said. "Dodd-Frank regulations cost money and take real technology, and it's not all open-source. So if you pull out a driver like regulation, will demand be there the way it was? I question that."
Banks and tech vendors could be blocked from shipping software development and operations jobs overseas. Trump has said many times he wants to bring jobs back home, for instance, by forcing Apple to build iPhones in the U.S.
This could affect the ongoing efforts of large banks and tech vendors to cut costs by laying off local workers and sending operations and development jobs to India, the Philippines and other countries where the pay is lower.
"If you take him at his word — and he's really campaigned on this — he doesn't want offshoring," Weiss said. "If you have manufacturing facilities outside the U.S. for your non-U.S. customers, I can't see how he has a problem with that. If you've been engaging in labor arbitrage, he does seem to have a problem with that."
Atkinson said he doubted the Trump administration would block or restrict offshoring.
"What I think could happen is Trump could use the bully pulpit," he said. If a large company moved jobs to India, Trump might publicly berate its managers. "That matters," Atkinson said. "If you're a consumer-facing company you have to pay attention to that. You don't want to look like you're a Benedict Arnold company."
Trump and Congress could dismantle net neutrality. The law President Obama pushed through in 2015 that requires communications service providers to provide equal internet access to all companies and not charge extra for high-speed service could be knocked down by a Republican Congress and President. This is controversial in part because charging a premium for the fast lane would put shallow-pocketed companies such as startups at a disadvantage.
"It's always been [Trump's] complaint that net neutrality allows free rides," Weiss said. "His residual complaint is that bandwidth is not free, people build those pipes" and therefore should have the right to charge what they want for them.
Atkinson sees net neutrality as a nonissue. "The whole net neutrality thing as a risk to Silicon Valley is dramatically overblown, demagogued and distorted," he said. "There's the issue of, 'could an ISP just block or degrade issuers?' They simply don't do that. They'd be stupid to do that. They'd lose business. With the exception of one ISP that eight years ago that blocked a customer using Skype, nobody's done that."
As far as internet service providers offering better service for higher fees, Atkinson said, "The rule or standard or the norm is going to be, 'you can't degrade best efforts internet, nor can you charge for bet efforts internet.' In other words, a small startup will get the same experience to their customers as they get today. That will never change."
Cybersecurity is a wild card. Trump made vague references to strengthening cybersecurity during his campaign. During the second presidential debate, he said, "The security aspect of cyber is very, very tough. And maybe, it's hardly doable. But I will say we are not doing the job we should be doing."
The president-elect's first cybersecurity briefing will be eye-opening, Weiss said, and will shape his policies. "My guess is anybody running for president, except for a retired general, will be gobsmacked by what they're hit with in this thing," he said.
Republicans have conflicting tendencies on cybersecurity, Atkinson noted.
"They're very much a deregulation party, the idea of them having strong regulations on business goes against their grain," he said. "At the same time, you have a national security wing of the party, which Trump is part of, that says this is about national security and integrity, we're going to have stricter regulations. There's tension in the party, I don't know how that will play out." It might depend on what kind of security fiascos occur.
The positives may slightly outweigh the negatives for tech companies and their customers.
"I keep waiting for the political party and the candidate that gets it right on all these different fronts," Atkinson said. "But on net, you could imagine the tech industry being modestly better off."
This would depend on two things. One is that the administration is run in a highly professional way. The other is that it handles relationships with other countries well.
"If Trump alienates foreign partners and adversaries and makes America look bad and isolates us, that will hurt the tech industry more than anything else," Atkinson said. "It's one thing to be strong and push back against countries like China that need pushing back against, but you have to be careful how you do it and America can't look like a bully or a laughingstock. That's a risk."
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