Small lenders have urged lawmakers to crack down on Facebook’s plans to offer a new digital currency that would form the basis of a global payments network that could sidestep banks, aligning themselves with liberals like House Financial Services Chairwoman Maxine Waters.
When Japanese e-commerce company Rakuten sought approval to establish its own bank in the U.S., bank trade groups fired off a letter to the Federal Deposit Insurance Corp. saying Rakuten shouldn’t be eligible for deposit insurance. Big bank lobbyists are plotting a Hill strategy to further derail other tech companies from following Rakuten’s lead.
The battle illustrates the extent to which the growing distrust of major technology companies has exposed the industry to attacks from all sides in Washington, fueled by the firms’ attempts to gain footholds in more parts of the economy. Bank lobbyists are looking to leverage those concerns.
“The growing antipathy in Washington toward Big Tech definitely gives banks an opening,” said Ian Katz, director at Capital Alpha Partners.
Other rifts are emerging. Amazon, Apple and Google are throwing their weight behind a new Federal Reserve-led initiative to speed up the payments system over the objections of Wall Street firms, which wanted consumers to instead move to a real-time payments network that the banking industry has spent more than $1 billion developing.
“Banks originally viewed themselves as impregnable bastions — just like hotels and taxis and retailing,” said Karen Petrou, who advises bank executives on policy trends. “But enough of the industry has realized that complacency is a really dangerous competitiveness strategy.”
The largest tech companies are stressing that while they may be offering financial services, they are largely trying to do it by partnering with banks rather than becoming banks themselves.
“Technology companies inherently are trying to solve problems with hardware and software,” said Brian Peters, executive director of the Financial Innovation Now coalition that includes Amazon, Apple, Google and PayPal. “They’re providing tools to help their users and their small business customers lead healthier, more productive lives. … They’re more about providing digital tools than they are trying to be a bank.”
Still, the fight between banks and tech is escalating on multiple fronts.
In the clearest example of how tech has stumbled as it has tried to win over an unfamiliar crop of policymakers, Facebook has quickly become a target because of its plans to launch the Libra digital currency.
Zuckerberg argues that Libra would give consumers a cheaper, more efficient way to move money than what is allowed now by the financial industry. But lawmakers in particular were caught off guard by Facebook’s plans, and the social media giant has been recruiting…