With the FCC voting 3 to 2 to repeal net neutrality today, let’s take a look at the impact a post-net neutrality internet may have on fintech and banking.
Politics and opinions aside, the repeal of net neutrality may have two main effects in our industry:
Pay up for fast fintech
Though Comcast has said it will not offer paid prioritization for websites, many are concerned that lack of regulation for internet service providers (ISPs) will create tiered offerings for fast lanes and slow lanes. In other words, if you want your site to load faster, you’d better have some extra cash. Since consumers have little patience for website loading times, this could be an extra stumbling block for fintechs with a grand idea but limited funding. The players with the bigger pocketbook, not the better innovation, may win out.
While this same principle applies to banks, it is not as large of an issue, since banks are cash flow positive and have income to foot the larger internet bill. Additionally, consumers have a lower elasticity of demand for banking services than fintech services. In other words, because online banking is seen as more of a true need, they are not only willing to pay more but they will also be willing to wait for a longer web page loading time.
The counter-argument is that, if net neutrality remains in place, everyone will end up with a larger internet bill since ISPs will need to find a way to build and maintain faster online networks. “If the rules stay in place… ISPs will have to find other ways to fund these robust networks,” Nicol Turner-Lee, a fellow in Governance Studies at the Brookings Institution told U.S. News.
An eye on competition
Another area of concern of an unregulated internet is competition. Currently, net neutrality prevents ISPs from discriminating toward competing applications. This argument isn’t generally heard in the banking/ fintech space, since ISPs do not own any competing banking or fintech applications. However, if an ISP was to create or acquire a P2P payment app, it could speed up that service, while potentially throttling performance for Zelle and Square Cash.
The counter-argument here is that we should allow the markets to operate freely and that the Invisible Hand will allow for faster innovation. In this line of thinking, perhaps if our favorite P2P payment apps are too slow we’ll be more likely to begin using the blockchain?