Wednesday, November 30, 2016 at 3pm

What Does Trump Mean for US Banking and Fintech?

What Does Trump Mean for US Banking and Fintech? main image

The emerging fintech industry could steal US$4.7 trillion in revenue and US$470 billion in profit from traditional financial services firms, according to forecasts by Goldman Sachs in 2015. This trend and the current political atmosphere could be increasing the appeal of fintech jobs among MBA graduates.

There are mixed feelings around the world about Donald Trump’s upcoming presidency, particularly in the international banking and fintech world, and it’s easy to get swept away by a hyperbolic view of what Trump means as a US president. However, I am here to look logically at what might happen with Trump’s proposed policies and initiatives (with no proof to go by yet) and how it can potentially impact the fintech industry and future MBA careers in the space.

Regulatory models

One of the biggest areas of change related to banking is expected to be around regulatory models. Trump has long been vocal about his desire to reform or demolish traditional regulatory models, like Dodd-Frank and Glass-Steagall, which have imposed controls on large banks for decades. This has been at the core of Trump’s campaign and pleased large banks – among which, according to a survey by American Banker, 52% supported Trump for the presidency.

Any change in the traditional regulatory model structure is good news for fintech jobs and firms alike – they are here to disrupt and to create drastically different business models for which there is a massive opportunity being created by abolishing a traditional model of working. What fintechs need is the opportunity to be part of a conversation around changing the status quo. That simple step can give immense power to new challenger banks, existing community banks and fintech startups to potentially create a regulatory framework that can work in their favor. It is unlikely there will be specific regulation created to handle fintechs, especially in alternative lending; however, there will be opportunities to make their challenges known and more visible than it is today.

The alternative lending market

The alternative lending market is one of the fastest growing markets within fintech, and is expected to become a trillion-dollar market in the next five years. Lower corporate taxes, increased inflation and higher interest rates are being talked about as potential results of policy impact. All these changes will have a direct impact on fintech jobs and firms, especially in the alternative lending space. SME (small and medium-sized enterprises) lending is largely an untapped market today and it is likely that this area will see a lot of interest from investors and entrepreneurs. Trump has been vocal about his desire to increase private investments in the student lending market and this is another area where a lot of startups can come up to tackle an underserved and fragmented market. For those considering a post-MBA career in this space, there is tremendous opportunity with startups, and is important to understand the impact of future fiscal policies to ensure firms or startups with the right business models are targeted during a job hunt.

Community banks could be the winners

If there is a chance of international isolationism and reduction of international investments (like after Brexit), large US banks with international exposure and large international banks with US exposure could struggle. However, this will likely give an opportunity for highly regional banks (like community banks) and fintechs (like challenger banks) to establish a strong customer base in their immediate region. This will also have a larger impact on other countries with large US exposure (UK, France, Germany, China, etc.), where regional banks and challenger banks could have a much better opportunity to launch, innovate and compete with large traditional banks.

Considering this change, those interested in MBA careers in this space should therefore note that opportunities for innovation-related job openings could very likely be with smaller, regional banks looking to innovate faster and launch new products and services rather than with large banks.

Support for entrepreneurial growth

Trump, as a person, has been one of the most successful entrepreneurs in the US. His knowledge and experience as an entrepreneur and businessman is vastly different to that of a career politician, and this could be one of the biggest changes to the way in which the country is run today. The lack of governmental leadership experience versus experience with real entrepreneurial struggles will be an interesting dynamic to watch and what might emerge is tremendous support for startups through new agencies and governmental bodies, new regulations and new customer markets. The opportunity is there, but it remains to be seen how this will be implemented.

A lot of the above is mere speculation based on what is expected and predicted and this is something to watch and analyze as the new US president starts implementing his policies. I am choosing to begin with a lot of positivity and faith in the US as well as its new leader. The growth of fintech jobs and digital banking opportunities has been tremendous in the past five years, and this is expected to continue regardless of short-term policy changes. Fintech, therefore, looks set to remain one of the hottest MBA career destinations in the US.

Main tag

Devie is a fintech industry advisor and analyst based in London. She writes extensively on fintech, digital banking and is a columnist with several publications. She is actively involved in the fintech startup community and has been listed as a top 10 fintech influencer by multiple agencies.

Tags used in this blog post