K-STREET, 10,000 FEET: Credit Card Kung Fu: Big Banking credit cards’ biggest threat are fintech startups
THE LOWDOWN:
America’s largest banks don’t want payment data to be freely accessed by consumers and have blocked fintech competitors from gaining access to this data;
This data includes account and routing numbers — the same numbers printed on Americans’ checks;
This could mean that the largest financial institutions have complete control over where and how consumers spend their money — such as blocking spending to conservative causes;
Section 1033 is a solution to level the playing field and protect consumers’ autonomy over where they spend their money.
America’s banking system is a global powerhouse that the world’s economy hedges on for stability. Our largest banks hold more money than the majority of nations on Earth, yet these same banks don’t want customers’ payment data to be freely accessed by financial technology (fintech) services. President Donald Trump recently called out the Bank of America CEO for debanking conservatives. And many conservatives have expressed frustration with large banking institutions censoring or de-platforming based on their First Amendment rights.
The motive for this move comes down to one simple factor: credit cards. Innovative fintech apps like Venmo and CashApp, as well as cryptocurrency, are direct competition to legacy banks’ credit card businesses. These credit cards are huge cash cows for these banks, with Americans’ credit card debt standing at a whopping $18.04 trillion in Q4 2024, according to the Federal Reserve.
This number is remarkably higher than the $927 billion of credit card debt in America prior to the COVID pandemic. Additionally, TransUnion calculated that the average credit card debt per consumer rose from $6,380 to $6,580 between Q3 and Q4 of 2024.
Typically, these large banks have blocked apps from getting consumers’ payment data: account and routing numbers — the same numbers physically printed on Americans’ checks. This is the equivalent of not being able to cut a check to whomever you want or need.
It also could mean that these banks are able to deny Americans’ economic freedoms by preventing them from supporting causes, organizations, or individuals that the bank bigwigs deem wrong or immoral, or against diversity, equity, and inclusion (in the case of two major U.S. banks).
One regulation helping smaller innovative companies claim would help this is the Consumer Financial Protection Bureau’s (CFPB) Dodd-Frank Section 1033 rule that was released in October 2024. Section 1033 opened up consumers’ access to banking and gave them the ability to retrieve and share their own financial data. The rule also required firms to turn over certain information for said consumers and their representatives.
Proponents of this claim the rule stands in the way of banks, or even a future president, from making banks block companies they don’t agree with from expanding their customer base. Additionally, the rule created competing payment rails that are outside of the banks’ control, preventing them and the Democrats from continuing their habit of recycling Operation Choke Point to debank conservatives.
