5 ways Trump could disrupt the payments industry

ByDaniel Wolfe, John Adams, Rob Blackwell

November 10, 2016 11:47 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.

Trump's election raises a lot of issues for the financial services industry, particularly for companies that operate internationally or rely on emerging technology. Here are a few areas Trump's presidency is likely to disrupt.

Business Team Investment Entrepreneur Trading Concept

Trump's election raises a lot of issues for the financial services industry, particularly for companies that operate internationally or rely on emerging technology. Here are a few areas Trump's presidency is likely to disrupt.

The exterior of a Western Union office is seen near place d'Italie in Paris, France, Thursday, January 26, 2006. First Data Corp. said it plans to spin off Western Union, the world's largest money-transfer business, in a transaction that may be valued at more than $20 billion. Photographer: Jean-Claude Coutausse/Bloomberg News

JEAN CLAUDE COUTAUSSE/BLOOMBERG NEWS

Traditional money transfers

Trump's plan to pressure Mexico to fund the construction of a border wall has one big, disruptive bargaining chip: remittances. In April, Trump revealed that he would cut off transfers between U.S. and Mexico if the country did not agree to his plan. Traditional money transfer providers like Western Union and MoneyGram would be the hardest hit, but the mandate could affect the broader U.S. economy; the U.S. is the biggest sender of remittances worldwide.

PayPal signage is displayed in front of eBay Inc. headquarters in San Jose, California, U.S., on Tuesday, Sept. 30, 2014. EBay Inc. is spinning off its PayPal division, heeding demands by activist shareholder Carl Icahn and giving the business independence it can use to contend with rising competition from Apple Inc. and Google Inc. Photographer: David Paul Morris/Bloomberg

David Paul Morris/Bloomberg

Global P-to-P

The border wall plan could have the opposite effect on digital payment companies, such as PayPal, since they can facilitate transfers without the need for an agent or store across the border. Person-to-person transfers between two U.S. bank accounts could look like domestic payments even if one of the parties is outside the U.S.

Donald Trump, 2016 Republican presidential nominee, center, speaks to the media following the first U.S. presidential debate at Hofstra University in Hempstead, New York, U.S., on Monday, Sept. 26, 2016. Hillary Clinton and Trump leveled sharp and personal charges and counter-charges over trade, the U.S. economy, race and foreign policy in their first face-to-face debate, an event that put on display their starkly different personalities and visions of the nation's future. Photographer: Daniel Acker/Bloomberg

Daniel Acker/Bloomberg

Net Neutrality

Net neutrality refers to the treatment of the Internet as an impartial utility, which bars Internet service providers from setting up tiered lanes that favor access based on pricing or other factors. Trump has compared net neutrality to the defunct Fairness Doctrine, stating that net neutrality would allow parties to target conservative content on the Internet. Fintech firms fear that if anti-net neutrality sentiment grows in the U.S., it could lead to the kind of uncertainty already plaguing the U.K., where British fintech companies were hard hit following the Brexit vote. In addition to open source, much of the current innovation in payments is geared toward cross-border transactions, using blockchain and cloud technology to ease execution and erase artificial borders. The idea that there may be even a digital wall built around the U.S. could further chill the market.

A passenger holds an Apple Inc. iPhone displaying the Uber Technologies Inc. car service taxi application (app) journey progress screen in this arranged photograph in Budapest, Hungary, on Wednesday, July 13, 2016. Uber will suspend its ride-hailing services in Hungary from July 24 following a government decision to pass a bill that allows authorities to block access to the mobile application and fine media promoting it. Photographer: Akos Stiller/Bloomberg

Akos Stiller/Bloomberg

Open development

The elimination of an open Internet would stifle fintech firms, a large portion of which rely on open source development or technology toolkits that decentralize innovation, allowing businesses to become payment companies with minimal coding. A significant amount of money has already poured into this market, notably PayPal's transformative $800 million acquisition of Braintree, the development platform used by Uber, Airbnb, OpenTable and TaskRabbit. In other words — without an open Internet, there would be no Uber.

Senator Elizabeth Warren, a Democrat from Massachusetts, questions John Stumpf, chief executive officer of Wells Fargo & Co., not pictured, during the Senate Committee on Banking, Housing, and Urban Affairs in Washington, D.C., U.S., on Tuesday, Sept. 20, 2016. Stumpf, struggling to quell public rancor after the bank's employees opened unauthorized accounts for legions of customers, said the company has expanded its review of the matter to include 2009 and 2010. Photographer: Pete Marovich/Bloomberg

Pete Marovich/Bloomberg

Regulation

Trump has taken numerous shots at Sen. Elizabeth Warren, D-Mass., the founder of the CFPB, but has not specifically addressed the agency itself. Most political observers believe Trump would be open to Republican efforts to dismantle or change the agency — but the president-elect has not endorsed such a plan.