EDITOR NOTE: Whichever side you sit on the political spectrum, one thing’s for certain: this upcoming election is going to be a game changer whether we end up with a Trump or Biden win. The differences are stark across the board, from trade policy to immigration to dollar digitization. It’s hard to imagine two “possible worlds” that are more extreme, more differentiated, and more incompatible than the ones resting on the outcome of this election. The article below outlines the profound differences in either outcome, explaining each in a clear and easy-to-understand manner.
The Republicans and Democrats have drastically different philosophies on the role of government in stimulus, globalism and access to web technology. President Donald Trump has made issues such as skilled worker immigration, remittances and Chinese digital commerce part of his political program, often creating controversies in other countries that could impair the ability of U.S. companies to execute transactions across borders.
Trump’s challenger, former Vice President Joe Biden, is more centrist when it comes to financial regulation than Democratic primary challengers such as Bernie Sanders and Elizabeth Warren, though Biden’s general election campaign has incorporated some progressive ideas inspired by his former party rivals.
The pandemic and subsequent economic crisis have raised the stakes, since the government’s role in recovery and how stimulus is delivered — and policies impacting the goals of card and technology companies — will be largely determined by the philosophy of leadership.
Part of the U.S. political fight is playing out in China. Trump has taken a hard line on China, sparking a battle that’s influenced how companies such as Mastercard, Visa and American Express move on plans to build a domestic payment market inside China.
The U.S. card brands for years have wanted to access China’s huge market, but China’s own protectionist policies have moved the goal posts. There was some movement on China’s part earlier in 2020 toward approvals — ostensibly tied to a preliminary U.S.-China trade deal — but the language was vague and final approvals are still pending. And the trade dispute between China and the U.S. rages on.
If Trump wins a second term, the fate of the U.S. card brands’ push will be tied to Trump’s posturing toward China, often involving issues not directly related to credit card processing yet still creating an adversarial atmosphere that could cloud negotiations.
Biden’s position on China is not dramatically different, as the former vice president contends China unfairly funds Chinese companies and discriminates against U.S. firms. Where Biden differs is in opposition to Trump’s tariffs, and in his calls for a group of U.S. allies to pressure China on trade policy. A coalition could change how U.S. companies approach China, potentially using the scale of partner markets in the region.
For the payments industry, the biggest trade policy difference between Trump and Biden is tariffs. Biden’s criticism of Trump’s tariffs suggests he would ease or remove them as president, and thus diminish one of the central themes of Trump’s presidency. Trump has levied or threatened multiple tariffs of varying sizes repeatedly, often as a way to sell American isolationism to a domestic political audience and to rail against globalism and free trade.
These tariffs have often involved countries beyond China, such as France, which imposed a tax on U.S. technology firms with e-commerce interests such as Amazon.
Biden's position of lowering the temperature on tariffs would be a big change for international supply chains and subsequent B2B payment flows, since it would remove the issue from negotiations for supply chain deals.
Trump issued a ban on WeChat in the U.S. and TikTok as part of a larger battle with Tencent and ByteDance, the two apps' China-based parent companies. It’s possible the TikTok divestiture, which is tied to the TikTok ban, will be complete or at least resolved before the November election, but the issue of data storage and the use of "data privacy" as cover for protectionism will linger.
Trump’s pressure on ByteDance to sell TikTok is part of a global trend toward requiring localized data storage, a trend that could increase expense for payment firms processing in different markets, including India and China.
Trump’s TikTok order, and similar pressure the administration has placed on WeChat, is based partly on data security, or the concern the Chinese government or other authorities could misuse information on U.S. consumers.
The WeChat ban, which includes a ban on WeChat payments in the U.S., could spark a revelation from China that would spill into a potential Biden presidency.
The ByteDance would likely not fall on Biden’s desk. As for data privacy as a general issue, Biden has expressed support for an American version of GDPR, the European data protection law.
Firms that do business in Europe have struggled to comply with GDPR, and a similar or stronger rule in the U.S. would potentially create more compliance expenses.
Facebook, Libra and crypto
Trump has weighed in on Libra, calling it "unAmerican" and suggesting Facebook apply to become a licensed bank. There's not a reliably predictable red-blue divide on Libra, since Trump's criticisms of Libra aren't that much different than Rep. Maxine Waters, D-Calif., who has called for a ban on financial licensing on large technology companies like Facebook.
Trump's position on cryptocurrency in general has waffled, but for the most part the president has taken a harsh stance toward cryptocurrency. Former national security advisor John Bolton claims Trump wanted to "go after" bitcoin as part of a broader discussion about trade policy and tariffs. Trump has also said cryptocurrencies "aren't money."
Biden has not had a lot to say about cryptocurrency, though he solicits donations in cryptocurrency and has not taken an overly negative view.
Following a recent Twitter attack on accounts tied to celebrities that asked for fraudulent bitcoin donations, Biden said he "did not own" bitcoin but did not say anything negative about crypto.
Under Trump, the FCC eliminated net neutrality, which had been an issue during the 2016 presidential race. Proponents of net neutrality said it equalizes access to the internet, and thus encourages development of new apps and also fuels the third-party development that large payment companies like PayPal and the card brands rely on to spot new innovation early on.
The argument against net neutrality is that it's against the business interests of internet service providers to provide lower-grade service to certain customers, and ending net neutrality encourages investment in expanding internet access.
The digital dollar did not wind up in the final stimulus bill, and there were problems with the direct payments that resulted, partly because more than a third of Americans do not have direct deposit established with the IRS. The problems have given new life to the concept of a central bank digital currency, or digital government payments, but there's differences between Democrats and Republicans that will determine how a future digital dollar will work.
A Biden presidency and Democratic controlled Congress would favor a more direct link between the Federal Reserve and consumers, via a public P2P app or a digital dollar. The Republicans favor a role for banks as an intermediary to distribute the funds. Divided government would likely ensure a continued stalemate.
In the mail
A "unity" Biden campaign document prepared with Sen. Bernie Sanders, I-Vt., calls for the Postal Service and Federal Reserve to support government-led banking functions. That would run counter to the Republican view, which would be prone to support proposals such as JPMorgan Chase's attempt to lease space in post offices to offer ATMs and other branch services.
The Biden-Sanders document and the JPMorgan Chase proposal both present a much different potential future for the USPS than what Trump has indicated. Trump referred to the Postal Service as a "joke" and has drawn the postal service into a battle over mail-in voting.
Harris is seen as a moderate on "big tech" issues, or even an ally, suggesting her influence could result in a relatively easier path for firms like Alphabet, Apple and Silicon Valley fintechs that have spent the past decade building mobile wallets and making e-commerce investments.
Harris has also advocated expanding government investment in digitizing government services, which could advance automation for government programs that include payments, such as the Affordable Care Act.
A recent executive order restricting H-1B and L-1 visas made it harder for U.S.-based payment companies such as Tipalti to relocate workers from outside the U.S. H-1B and L-1 visas often cover technology workers such as programmers and engineers, the talent lifeblood of fintech, payment and cross-border e-commerce companies.
Other Trump orders on immigration pushed payment companies to hire more freelancers to serve in non-U.S. roles. That created payment flows for processors in the gig economy as part of the fallout.
Earlier in his presidency and in the 2016 campaign, Trump threatened to "ban" remittances to Mexico to force Mexico to pay for the border wall. The remittance ban never came and the wall remains largely unbuilt.
Remittances came up again recently, with Trump suggesting a "toll" for cross-border traffic would in effect push Mexico to pay for the border wall. He also suggested a new tax on remittances.
Since Biden is opposed to the border wall, he'd have no reason to use the Mexican remittance corridor as a forcing mechanism. Biden has called for an easing on restrictions to remittances to other Latin American countries such as Cuba.
Originally posted on Payments Source