The global fintech sector has faced unprecedented challenges lately due to rapid changes in U.S. policies. The second term of President Trump has been a bumpy road for financial markets and businesses worldwide. Frequent updates and announcements about tariffs
and geopolitics shook markets as well as the global fintech environment. What is a good business idea one day, turns out completely useless on another. The Trump administration’s deregulatory agenda, “America First” and crypto-friendly stance promise to reshape
fintech operations and cross-border transactions.
The State of the New U.S. Policy Landscape
The Trump administration is known for its anti-biden tone and many of Biden-era policies are about to reverse. As a result, the landscape can shift to different scenarios where some fintechs thrive while others struggle.
Deregulation accelerated
It is expected that the partial rollback of Dodd-Frank will be resumed which will reduce the compliance burden for fintech leading to more intense competition. This has the potential to lower entry barriers for new startups meaning more and more new fintech
companies will be introduced, which will make the life of established startups more difficult as they have to face many competitors.
Cypro policies reversed
Trump promised to end the “persecution” of crypto and it includes rescinding of SEC’s Staff Accounting Bulletin 121 which was blocking bank crypto custody. It is no secret that the blockchain sector is home to a plethora of revolutionary startups especially
fintech companies and this stance is very positive. However, this also introduces compliance challenges for crypto fintech startups which leaves uncertainty on the table.
Capital rules changed
The Basel III Endgame proposal will likely get scrapped easing capital requirements for banks partnering with fintechs. Also, CFBP rules on “open banking” and nonbank payment supervision face revision which eliminates some challenges.
FX Volatility: The Silent Fintech Growth Killer?
Currency fluctuations have become extremely volatile lately due to tariff announcements. This can have profound effects on fintech startups that are directly involved with currencies. As commented by experts from
Luxren Capital: “Unstable FX rates pose existential risks for international fintech due to margin compression in volatile quarters – forcing them to choose between absorbing losses or increasing pricing on services.”
Transferring costs to end-users makes fintechs less competitive to clients but due to foreign exchange volatility, this might be a reality for fintechs. This might seem like a little issue at first but financial technology companies are mostly involved with
currencies and heightened volatility directly impacts their profitability and service quality.
Fintechs facilitating cross-border transactions and converting one currency into another are especially vulnerable to FX volatility caused by Trump’s tariff announcements. This volatility is not just a treasury issue either as it can cascade into payment
failure, and settlement delays, and negatively affect the company’s reputation.
Trump’s Tariffs
Both stock market and foreign exchange volatility are primarily caused by Trump’s announcements regarding
tariffs. Many startups experience serious turbulence as they face both stock price crashes and currency risks simultaneously coupled with increased competition in the sector. Tariffs directly affect
the economy and companies that face higher costs are naturally prone to bankruptcy despite the President’s pro-business stance.
Immigration barriers
Trump is also known for his anti-immigration rhetoric and policies. Trump’s anticipated H-1B visa cuts can starve fintechs of 40% of their engineering talent, which has a serious impact. While AI can replace many of the jobs it can not keep up with the decline
of this scale. Tariffs can also force fintech to establish elsewhere like Ireland and Mexico to acquire talent and maintain low costs.
Compliance fracturing
The U.S. regulatory landscape that consists of 50 state regimes plus federal agencies creates minefields for fintechs. Data privacy fragmentation becomes a real issue as Biden’s 2024 Executive Order for unified biometric and genomic data rules might get
revoked. There are also licensing inconsistencies across US states. Money transfer licenses which are required in 50 states cost fintechs 500k-2M dollars annually, which makes it difficult to launch new startups without strong capital support. The
OCC’s fintech charter is currently blocked and it could simplify this but faces opposition from state regulators, making fintech life difficult.
