Could the repeal of net neutrality rules by the Federal Communications Commission stifle the growth of technology and payments in the financial services industry? One law firm posits that the potential is definitely there for the financial services industry to face a host of new problems now that internet service providers are no longer required to treat all internet traffic the same.
The FCC last week voted to repeal net neutrality rules, which required internet service providers to treat all traffic the same, regardless of content or user. Now that ISPs no longer have to follow the requirements, it is expected that they will roll out additional fees and charges for accessing certain types of content or roll out additional fees based on how much data is used by its customers.
Andrew Toftey, a partner at the Lindquist law firm, raises the questions of how this new paradigm will affect the financial technology, or FinTech, sector, and payment processing companies, especially those offering peer-to-peer platforms.
First, fintech companies (generally speaking, young companies with fewer resources whose business models are supported by fast, cheap internet access) which find their internet speeds either throttled or more costly may be outcompeted by larger, more established businesses which can more easily pay for higher internet speeds. This may result in fewer fintech companies bringing new ideas and products to market.
A more direct impact may be felt in peer to peer payment platforms. One could imagine two or three reasonably similar mobile device based payment applications, which have purchased (or can afford) varying degrees of internet access. If one P2P platform takes 1-2 seconds to transact, while another takes 10-15, from a user experience perspective it is reasonable to assume the slower platform will quickly be abandoned in favor of the quicker platform. Again, this favors providers with either larger margins or deeper pockets that can afford to pay for faster internet access, or a model that introduces tiered pricing for speeds. One can imagine P2P platforms offering free and premium versions of their platform, with a premium version introducing higher access and settlement speeds.
Furthermore, will companies in the financial services industry — especially those regulated by the Consumer Financial Protection Bureau — now be required to publish the internet speeds at which their users/customers will be able to transact business, or possible face a UDAAP (unfair, deceptive or abusive acts or practices) violation?
