Biden wins, but his fintech policy faces partisan headwinds

President-elect Joe Biden's victory over incumbent Donald Trump will end four years of Trump-led isolationist policies, but the balance in Congress is still uncertain and could stall the President-elect's agenda.

The President and Congress face historic challenges due to the pandemic — on Election Day, the daily coronavirus caseload in the U.S. passed 100,000 for the first time, and countries across Europe were implementing stricter shutdowns.

That threatens both the U.S. and global economic recovery, putting more pressure on governments for additional stimulus. Before the election, Democrats and Republicans could not agree on a new stimulus package in the U.S., haggling mostly over aid for state and local governments.

The partisan rancor that's marked the past four years probably won't fade quickly, but given the closeness of the election, the lack of either a red or blue wave, and the struggles of people and businesses, there is pressure to demonstrate government is functional. After an initial spurt of productivity, the two sides will likely retreat into their normal partisan corners.

Morry Gash/Bloomberg

“Generally, confidence in the government is critical for rulemaking,” said Matthew Kopko, vice president of public policy at DailyPay, adding the period before the new government is sworn in in January could be surprisingly productive. “Often, except for large initiatives that are close to the finish line, there can be a lull in substantial rulemaking activity in the wake of an election. So expect that to be the case here.”

U.S. Sen. Mitch McConnell, who won re-election in Kentucky for a seventh six-year term, struck a conciliatory tone shortly after the election, promising to work on a new stimulus bill when the Senate goes back into session the week of Nov. 9, though the Republicans and Democrats are still far apart on details. McConnell also expressed a willingness to discuss some of the Democrats' demands for more incentives, something the Kentucky Senator had not done earlier in the summer, when the GOP floated stimulus without local government aid and direct payments. But a deal will be hard to get done.

A new round of direct payments to Americans could be in the new bill, as well as new funding for banks and fintechs to support lending and other rescue measures for small businesses.

None of the new bills include language to modernize government disbursements, though Kamala Harris has been an advocate for upgrading government agencies to improve

Beyond the "lame duck period" there will be a split government of some form, though the details haven't been determined. The Democrats will still control the House, but Senate control is still in flux. Two Georgia seats face potential run-offs in January that could determine whether Democrats or Republicans control the chamber. Sen. David Perdue (R-Ga.) leads in his race, but has fallen below the 50% vote threshold necessary to avoid a January runoff against his Democratic challenger, media executive Jon Ossoff. So it's likely Perdue and Ossoff will square off again early in 2021. The other Georgia Senate race is already headed to a runoff, pitting GOP Sen. Kelly Loeffler against Democratic challenger Rapheal Warnock.

Perdue has spoken out against FedNow on government overreach bounds, while Ossoff has advocated luring technology companies to Georgia, which is already home to numerous fintechs and payment processors.

Regardless of what happens in Georgia, a 50-50 or GOP-controlled Senate spells gridlock, or at least little chance that either party will get its way on issues such as net neutrality, the role of government vs. banks in digital stimulus payments or rules governing the influence of large technology companies. That includes privacy regulations and consumer protections tied to mobile wallets or e-commerce.

There's some bipartisan agreement on data protection, so there could be a path to pass a GDPR-style law in the U.S. through a split government.

"It’s going to take some time to sort out what will happen with security and data privacy," said Paul Fredrick, financial services and insurance manager at Hyland, adding California has passed Proposition 24, which expands data privacy laws to be more in line with GDPR. "The U.S. has already had to comply with these laws when conducting business overseas, and now on domestic soil. The adoption of laws like this will have a major impact across the country around how financial institutions can and should be using customer data."

Hyland added there may be political traction to support more fines for financial institutions that break new consumer privacy laws.

Some things could change almost immediately, such as international posture and positions on consumer protections. During Trump’s term, particularly early on when Republicans controlled both chambers of Congress, the Consumer Financial Protection Bureau was pressured and restrictions on payday lending were rescinded.

"The Consumer Financial Protection Bureau could be impacted immediately by the election outcome," said Sipho Simela, head of mortgage strategy at Ocrolus. "Presumably a Biden administration would want to strengthen the power of the CFPB."