After weeks of simmering tensions, the battle between fintech firms and banks is finally spilling into the public eye—and it’s pitting factions of the fragile Trump coalition against each other.
At its core, the skirmish is around open banking, a policy first introduced in the 2010 financial Dodd-Frank reform that the Consumer Financial Protection Bureau was set to finalize, 15 years later. Fintech firms like Plaid championed the concept as a consumer-friendly approach to controlling your own data and making it more freely transferable between different institutions, like JP Morgan and Robinhood. Banks, predictably, were not so thrilled, raising alarms over security risks.
As I wrote back on inauguration day, it wasn’t necessarily clear where the Trump administration would land. Traditionally, old guard banks have held enormous influence in D.C., spawning nicknames like Government Sachs. But Trump 2.0 is staffed by venture investors and funded by crypto dollars, meaning the balance of power was shifting.
One of the Trump administration’s first acts was to gut the CFPB, with its open banking proposal sacrificed as collateral damage. Almost immediately, big banks signaled that they would begin charging fees to fintech firms for accessing consumer finance data—a move that a16z general partner Alex Rampell decried as “Operation Chokepoint 3.0” (here we go again).
This is where things get tricky. In a strictly Manichean outlook on Trump world, you might think that any supporter wants to destroy the CFPB and anything it stands for. But now you have financial technology advocates arguing that, actually, the CFPB should be moving forward with its open banking proposal (but probably not any of its pesky enforcement work). It almost seems like an ancient Greek paradox. Is implementing regulations that create more freedom in markets actually deregulatory?
Clearly indifferent to the irony of boosting an agency that many of them are trying to nuke out of existence, a coalition of fintech and crypto leaders issued a letter on Wednesday to Trump, imploring him to oppose the fees that banks were threatening to impose. A trio of bank industry groups lobbed back, describing the accusations as “misleading.” In the meantime, the slimmed-down CFPB announced earlier in the month that it was going to revisit open banking rules.
Even if you don’t care about the particularities of data sharing, the showdown still reveals the fascinating new faultlines in D.C.—and the mounting power of the financial technology industry. Even as the big banks recognize the sea change and embrace once-anathema sectors like crypto, they don’t hold the same grip on politicians that they once did. Just look at Trump’s executive order on debanking, which targeted not the regulators, but the banks that supposedly cut off services for political reasons, including to Trump himself. The era of Government Sachs may be waning.
ICYMI…Speaking of shifting sands in the world of finance, Ben Weiss and I have been reporting on how fintech giant Stripe is doubling down on its crypto bets. That includes plans to launch its own blockchain, which will be helmed by venture power broker—and Stripe board member—Matt Huang of Paradigm.
Leo Schwartz
X: @leomschwartz
Email: leo.schwartz@fortune.com
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This story was originally featured on Fortune.com
