Trade wars and fintech

Trade wars are often viewed through the lens of tariffs, manufacturing and geopolitics. But beneath the headlines of retaliatory duties and disrupted supply chains lies a quieter casualty: fintech.

It’s easy to assume that financial technology, built on bits and code, would be immune to the fallout of protracted trade conflicts. After all, fintech thrives in the cloud – borderless, decentralized and agile. But make no mistake: when global economies go into protectionist mode, digital finance doesn’t escape unscathed. It gets entangled, slowed down, and sometimes, left behind.

I’ve seen this unfold up close – from global forums where we discuss open finance collaboration, to rural barangays where we extend inclusive banking such as the RCBC ATM Go or offer digital credit to unbanked and underserved communities. The ripple effects of global tensions aren’t just felt in boardrooms. They land in remittance corridors, fintech developer hubs and digital wallets or accounts on the phones of everyday users.

So how exactly does a trade war – prolonged and deeply political – shape the trajectory of fintech?

Let’s unpack it.

Fintech’s biggest promise is interoperability. But trade wars lead to its exact opposite: fragmentation. When countries begin to view data, digital platforms, and even cloud infrastructure as instruments of national sovereignty, global standards break down. We saw this in the growing push for “data localization” laws, barring financial data from leaving domestic borders – often in response to geopolitical mistrust.

This doesn’t just disrupt big banks or multinational tech firms. It deeply affects small fintech startups trying to scale cross-border services. Open banking APIs, digital identity verification, and fraud analytics rely heavily on seamless data exchange. The moment you insert political firewalls, innovation stalls.

Too often, it becomes an ideal sidelined by realpolitik. But for me, that tension between aspiration and reality sparks a different kind of excitement – a reminder of where I came from, and how it all comes full circle.

My academic journey began in political science as my undergraduate course, and two graduate degrees on public administration and national security. In my 20s, I taught political science, comparative politics and international relations at the UST Faculty of Arts and Letters – four years that sharpened my lens on how the world works, and why it often doesn’t.

Early in my career, I had the privilege of being mentored by Peter Wallace at The Economist Intelligence Unit, where I served as an associate editor for nearly five years. That experience, along with my academic background, deeply shaped my worldview – giving me a firm grasp of geopolitics and global systems.

Today, in the world of banking and fintech, those same perspectives guide me. They help me read the undercurrents beneath the headlines, connect the dots, and offer more grounded, strategic insights. Because the seismic shifts we’re facing now – from trade wars to AI disruption – are more profound than any natural tremor. They’re reshaping the global order. And we need to be ready, not just to adapt, but to lead.

Protracted trade wars are not just battles of policy – they’re confidence killers. In uncertain climates, capital becomes cautious. Foreign direct investments dry up. VC funding becomes conservative. And this hits fintech hard.

Startups that depend on cross-border capital – especially in emerging markets like the Philippines – face greater scrutiny. Investors begin to ask tougher questions: “What’s your exposure to China?” “Will your payment rails comply with US sanctions?” “What happens if your tech stack is blacklisted?”

And suddenly, a promising Series A gets delayed. A regional expansion gets put on hold. A digital lending platform can’t meet its scale targets.

Trade wars don’t always kill fintech ideas outright. But they quietly erode the fuel that feeds their growth: trust and capital.

Yes, semiconductors and rare earth elements are the most obvious victims in any trade spat. But fintech is increasingly hardware-dependent, too. POS terminals, biometric ID scanners, NFC-enabled cards, mobile devices for field agents – these are the last-mile tools that make digital finance real and inclusive.

When these components become scarce or expensive due to tariff hikes or export bans, the trickle-down impact on fintech enablement becomes very real.

Take digital transport payments, for instance. We’ve been working to build a bank-agnostic, interoperable system in the Philippines. But sourcing the right EMV contactless terminals or transit cards becomes more difficult and costly when trade barriers affect manufacturing hubs.

Every delay in hardware deployment is a delay in inclusion.

Fintech is global by design – and so is its talent.

But trade wars often spill into immigration and labor policies. Visa restrictions, tightening of work permits, and “national champion” mandates limit the free flow of fintech talent. Collaboration across borders becomes a bureaucratic minefield.

The consequence? Innovation silos. Echo chambers. A narrowing of imagination. And ultimately, a slower path to digital transformation.

Fintechs dealing in cross-border payments, crypto trading or digital lending often operate in a precarious web of foreign exchange exposure. A prolonged trade war — with tit-for-tat sanctions and tariff escalations — often results in currency volatility.

This can wreak havoc on treasury operations, remittance corridors, and even consumer pricing models. What was once a low-cost, stable remittance solution suddenly becomes unaffordable. FX hedging becomes more expensive. Risk models lose accuracy. Consumers lose trust.

In a world where trust is fintech’s greatest currency, this erosion is damaging.

And yet, in crisis – opportunities arise. Despite all this, I remain optimistic.

Trade wars force us to rethink over-dependence. They challenge fintechs to build more resilient architectures –sovereign cloud alternatives, open-source stacks, multi-rail payment infrastructure, and diversified supply chains.

They also open up new alliances. As traditional superpowers decouple, regional cooperation often strengthens. Southeast Asia, for instance, has a real shot at becoming the world’s sandbox for fintech interoperability – precisely because we are forced to depend more on each other.

It’s in these moments of friction that innovation finds new ground. But this doesn’t happen automatically. It requires leadership – both from the private sector and from governments. We need digital diplomacy. We need fintech players to be part of trade negotiations. We need smart regulation that ensures compliance without killing creativity.

More importantly, we need to stop treating fintech as a bystander to geopolitical events. It’s not.

Fintech is infrastructure. It’s the backbone of inclusion, the circulatory system of commerce, and the neural network of trust. When trade wars destabilize that infrastructure, the impact isn’t abstract. It’s real. It’s felt by the single mom waiting for a digital loan approval. By the OFW sending money home. By the student paying a fare with a QR code.

In the end, the fintech industry must build not just for scale – but for resilience. Not just for growth – but for sovereignty. Not just for today’s use case – but for tomorrow’s uncertainty.

Trade wars may come and go. But our commitment to inclusive, adaptive, and sustainable digital finance must remain unshakable.

Because if we don’t build for a fractured world, we’ll never achieve a truly connected one.

Lito Villanueva is the Philippines’ leading and award-winning thought leader in inclusive digital finance. As EVP and chief innovation and inclusion officer at RCBC, he has led several digital initiatives at scale. He is also the founding chairman of Fintech Alliance PH, overseeing 95 percent of the nation’s digital retail financial transactions. He is the first global chairman of the South Africa-based Alliance of Digital Finance Associations, a co-founder of the Asia FinTech Alliance and a permanent council member of the Asia FinTech Forum. He has substantially impacted the fintech landscape in the Philippines through his leadership and innovative efforts. His contributions have been crucial in advancing the fintech ecosystem in the Philippines, making financial services more inclusive and efficient.