How The Biden/Harris Win Might Affect Retail and Financial Services
If 2020 has taught us anything, it’s to not make predictions…but we couldn’t help ourselves. We’ve taken a shot at 10 things that might happen as a result of new leadership in the White House.
- New policies and regulation accelerate open banking
A focus on consumer financial empowerment — especially for underbanked and unbanked population segments — will drive greater portability of financial data and support for alternative models that challenge the dominance of main street banks.
- New stimulus increases consumer spending and stabilizes SMBs
With the potential to control both houses of Congress and the White House, Democrats are likely to push a multi-trillion dollar stimulus package that was discussed throughout the summer and fall. If passed, the scale of the proposed stimulus would inject significant capital into the hardest hit sectors of the economy — including small businesses and continued unemployment benefits.
- Community Re-investment Act expands access to mortgage and insurance
The Biden Administration will look to expand the application of the Community Reinvestment Act to mortgage and insurance industries. This will force industries to readjust existing policies, develop new products and expand coverage to low-income communities.
- Retail banking offered by the Fed and postal service
The Federal Government will leverage existing regulation and capabilities to expand the availability of banking services to underbanked and unbanked individuals. This may include offering zero cost bank accounts via the Federal Reserve and leveraging the Postal Service as a low-cost “agent banking” network to provide cash management. At scale, this would create pressure on existing banks but also on emerging FinTech players that have aggressively pursued underbanked individuals.
- Federal credit reporting agency created to use alternative scores for federal loans
Underlying models for credit will be restructured as part of a broader effort to expand access to credit and low-cost lending options. The creation of a Public Credit Reporting Agency will enable the Federal Government to establish its own credit score — independent of those provided by the major bureaus — and use this as the basis for all Federally guaranteed loans — including student loans as well as government-backed residential loans (e.g., HUD, Freddie Mac, etc.).
- Fed doubles down on its own real-time payment network
Efforts to accelerate and bolster a Federally managed real-time payments network will create additional competition to existing bank-led efforts. In all likelihood, a Fed-backed real-time payments network would provide a lower cost alternative. Rather than developing proprietary services as part of this network, it’s likely that the Federal Reserve would publish open standards that enable third parties to integrate and offer additional products that leverage this network. This could expand not just the availability of direct payments (e.g., check settlement) but the scale and scope of payment-enabled experiences (e.g., smart bill pay).
- Increased consumer lending protections alter underwriting and collections
Predatory and aggressive lending practices will receive far greater scrutiny under a Biden Administration. Re-empowerment of Federal agencies, notably the CFPB, with stronger enforcement powers will likely lead to much stricter rules on foreclosure, collections, etc. This will include new policies that target eligibility, communication, timing and processing of underwriting and collections across lending categories (e.g. mortgage, credit card). This will increase the cost and complexity of regulatory compliance and impact profitability for existing lenders and servicers.
- Trade wars de-escalate, reducing pressure on import-heavy retailers
Trade policies put in place by the Trump administration have threatened retailers that rely on imported goods. A Biden administration will likely seek to normalize and restore trade relations with key allies. However, pressure from organized labor and the party’s progressive wing will weigh on the scope of potential free-trade agreements. At the same time, policy hawks will continue to push for an assertive economic stance on China — albeit through a multilateral approach.
- Return to strict quarantine hurts retail in the short term
A Biden response to COVID is likely to include more aggressive lock-downs across retail, restaurants, and other industries. This may hurt these industries in the short term, but if it leads to a faster recovery from the pandemic, it will be positive in the long term.
- Pro-labor wage policies increase retailer costs and thus force automation
While a federally mandated minimum wage may be difficult to pass without a majority Democrat Senate, the prospect of such a change may prompt retailers and financial institutions to increase investment in labor savings at the retail locations and across the supply chain.