Fintech is a nascent yet rapidly growing industry. Imagine how rapidly China developed from a primarily rural economy to a global economic powerhouse in several decades. Now imagine an equivalent growth but within one decade. All rapidly growing influential industry has lead and lags. Fintech’s lead is finance and technology; the lag is the political arena.
Both Democrat and GOP candidates have paid visits to Silicon Valley to procure support for their respective campaigns. On their part, fintech has their coterie of lobbyists as well, but their influence and monies pale in comparison to long-term established industries such as finance, health and media.
fintech may prefer a GOP-led government for the purposes of continuing their business model in an unregulated industry
Currently the fintech industry’s core business is peer-to-peer lending, crowdfunding and wealth management. Their advantages over their conservative competition are as follows:
- Because fintech is non-regulated it is more nimble in responding to changes in the marketplace.
- Fintech is mostly internet based instead of brick and mortar and consequently achieves a broader reach at a lower fixed cost.
- Fintech uses multiple measures of risk assessment for loan approvals, and thus can reach more credit-worthy customers whose traditional credit risk indicators don’t fit the 21st century business reality.
This business model plays well for both the Democrats and the GOP because it creates jobs and provides smaller businesses with funding to hire and continue operations. Fintech’s entrepreneurial spirit and dearth of regulation mirrors the GOP’s traditional economic message of an “up by the bootstraps” mentality and limited government interference.
Ironically, despite their less conservative, even liberal ideological preferences, fintech may prefer a GOP-led government for the purposes of continuing their business model in an unregulated industry. This model supports the GOP’s pro-business, self-regulatory doctrine which is a form of “shadow banking”, a nefarious sounding yet legal method of conducting business in such a way that it does not require the scrutiny of regulations or oversight. The problem with shadow banking is that neither private industry nor government can measure or has a clue as to the overall industry risk.
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The flip (dark) side is the potential political tradeoff for the continuation of a non-regulated industry. As Gordon Gekko bluntly said in the classic film Wall Street: “The most valuable commodity I know of is information.” And that’s what the fintech industry is – the collectors and guardians of troves of information. Using cutting-edge analytics this information is acquired legally through open (public) sources and third parties and others voluntarily provided by customers. Because of this informational mother lode, fintech could be legally “deputized” to provide information requested by the government, essentially a de facto subsidiary of the NSA with respect to filling in the gaps of citizen profiles such as sniffing out tax dodgers or flagging large transfers of assets or blackmailing political enemies.
that’s what the fintech industry is – the collectors and guardians of troves of information
Under the broadly interpreted Homeland Security laws, fintech firms may be obligated to share information just as telecommunication and banking industry for the catch-all purpose of “national security.” In an era of cyber-wars, these fintech firms are automatically recruited by the government against potential or even perceived domestic and international threats.
National security outweighs shareholder gains should a merger, transfer of technology, even the employment of individuals from sovereign states are deemed suspicious. The GOP may appear to be more aggressive in these matters however the Democrats are just as cagey and ruthless. The tricky end game objective for fintech is the precarious balancing act of keeping the government satisfied in such a way so as not to become a regulated industry. For this reason fintech’s wish for a GOP-controlled government is their best option.