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Fintech and The Donald: Where Do We Go From Here?

January 19, 2017 • By Emily Mackay

On Friday 20th January, Donald Trump will be inaugurated as the 45th President of the United States in a ceremony that dates back to the days of George Washington. After he swears the presidential oath, the United States Marine Band will perform four ruffles and flourishes, followed by ‘Hail to the Chief’.

That chief will have profound implications for global financial markets – and for fintech. Here’s why.

On Friday 20th January, Donald Trump will be inaugurated as the 45th President of the United States in a ceremony that dates back to the days of George Washington. After he swears the presidential oath, the United States Marine Band will perform four ruffles and flourishes, followed by ‘Hail to the Chief’.

That chief will have profound implications for global financial markets – and for fintech. Here’s why.

Uncertainty.

And, as the age old adage goes, there’s few things that global financial markets hate more than uncertainty.

Uncertainty has been swirling in markets for months, ever since the possibility of Trump’s election became more than just a possibility. Normally, paradigm-shifting events like this are ‘priced in’ to the market, with counterparties, governments and banks aligning their interests long before the event itself occurs. But this one was an outlier, and a big one. Hence, there was no way to ‘price in’ its eventuality, because few, other than a minority of prophetic contrarians (now, very rich), ever truly expected it to happen.

On a macro level, Trump’s stated economic policies imply wholesale changes to the US economy, the effects of which can’t be accurately foreseen. With a Republican president in the White House and the GOP in control of both Houses, we might assume that we’re entering an era of downsized government, low taxes and exponential business growth. But we might be wrong.

Protectionism, immigration control and job creation are the order of the day, and these regressive – but popular and, most importantly, tweet-able – policies will surely have a profound impact on US growth and indeed, global macroeconomics, for many years to come.

The rolling back of financial regulation – or at least, a dramatic and revolutionary reformulation of the regulatory framework – could also slow the ascent of fintech, at least in the short term.

Trump himself has stated: “Every year, over-regulation costs our economy $2 trillion dollars. The US economy today is 25% smaller than it would have been without the surge of regulations since 1980.”

The President Elect has also been vocal about his desire to “scale back” (i.e. repeal) Dodd-Frank (a reform and protection act signed by President Obama that intends to prevent the excessive risk-taking that led to the financial crisis in 07/08). He’s even suggested abolishing the Consumer Finance Protection Bureau (CFPB), the foremost supporter of fintech amongst the US agencies. This could hurt fintech companies and investors, who have been crying out for fintech-specific regulation in order to streamline compliance, expedite routes to market and fuel growth.

Of course, in the long run, regulatory overhaul might have positive implications for the wider financial services industry, which, it’s fair to assume, could be a net positive for fintech. So there could be opportunities for those with the expertise and appetite to manage risk and uncertainty. Every market move has its winners and losers, and every crisis has its king.

Overall we’re not buying the argument that fintech investment will inevitably slow in the Trump era. We will all have to wait and see what happens with US financial policy before the clouds of uncertainty lift, but, one thing is for certain: things just got interesting.