Whenever a new president is inaugurated, he brings with him a fresh outlook and the promise of change. Such will be the case in less than a week when Donald Trump returns to the White House. The former president and billionaire businessman campaigned on “fixing the economy” and promises a new focus on U.S. energy, deregulation and a business-friendly atmosphere.
“Washington is open, and the United States economy is open. The era of post-financial crisis regulation, lawmaking, and politics is dead and gone,” said Patrick McHenry, the former North Carolina Congressman and Chair of the House Financial Services Committee, in his keynote speech at the Frontiers of Digital Finance Conference at the University of Miami on Tuesday, Jan. 14.
US Representative Patrick McHenry (R-NC) served as Chair of the House Financial Services Committee. … [+]
McHenry expects that the Trump Administration will work toward curtailing spending and reducing the national debt to help get the country back on the right financial track. The president and his team will have a lot of work to do, following a Treasury Department report that the U.S. budget deficit swelled to a record $700 billion in first quarter of fiscal year, up from $510 billion in the same period last year, an increase of 39%. Total spending was $1.8 trillion, while revenue was $1.1 trillion, resulting the $700 billion deficit.
Among the expenditures: the government spent $308B on debt interest in the first quarter of FY2025.
· Spending was up 41% ($9 billion) at the Department of Homeland Security, most of that due to FEMA spending on hurricane and disaster relief.
· Spending at the Department of Veterans Affairs went up 13% ($11 billion) due to an expansion of benefits for veterans.
· The EPA also spent an extra $21 billion so far this year to put forth its greenhouse gas reduction funds, and
· Social Security costs were up 6% so far this year.
“Without structural changes the way we spend money in Washington, we will suffer a severe consequence,” McHenry said. “The last time we had a wholesale remaking of our federal government was in 1920. We have a federal government that is beyond our capacity to pay for it at its current size.”
He also believes digital finance will play an important role in addressing the country’s financial challenges.
Related: Increased Fintech And Bank Partnerships Will Benefit Small Businesses
“If America is going to remain at the top of our game economically, we have to catch up to the pace of digitization of our world,” McHenry said at the FDF Conference. “We have to make sure that we are equipped to deal with the changing formats especially in financial services, with the deployment of artificial intelligence.”
Financial technology (fintech) has revolutionized small business lending.
Benefits of The Digitization Of Finance
Digitization has revolutionized small business finance by expanding access to capital and streamlining the process. In the pre-digital banking world, which is not that long ago, small business owners looking for funding had to visit banks, sit down and meet with a loan officer, fill out lots of paperwork, and then hope for approval, which could often take weeks to obtain – if at all. The experience could be intimidating and frustrating, particularly for minority entrepreneurs who had language barriers or who might not have had much experience dealing with the U.S. banking system. If a loan application was declined, the business owner would have to go into another bank and repeat the experience again.
The ability to apply for funding online and submit supporting documents, such as bank statements, P&Ls, and tax returns, via computer or smart phone made it securing capital easier and more convenient than ever before. In fact, submissions often are made at night or on weekends, when business owners have more time, but bank branches were closed. Lenders that embraced technology began to use algorithms to assess applications more quickly than ever before, thereby shortening approval times from weeks to days – and sometimes even just hours.
Banks, particularly larger institutions that often catered to their own customers, often had strict lending parameters and were less willing to take risks. This opened the door for smaller banks and non-bank lenders who were willing to give money to borrowers that might not meet the big banks’ tighter lending standards. Alternative lenders proved willing to provide capital to borrowers that traditional banks turned down. This is how financial technology (fintech) has expanded access to capital.
Digitization and Artificial Intelligence (AI) Is Taking Small Business Finance to The Next Level
Today, Artificial Intelligence (AI) has transformed the lending industry by enabling faster, more accurate, and efficient decision-making processes. AI can analyze vast amounts of data, including credit scores and data such as utility bill payments and rent payments, to determine a potential borrower’s creditworthiness. AI looks beyond credit scores and examines spending habits, transaction history, and behavioral data to predict a borrower’s likelihood of repayment, the primary concern of any lender. By analyzing many data points, AI enables lenders to assess risk while potentially helping borrowers with little credit history gain access to capital.
AI makes lending more efficient because it can use inconsistent or suspicious data to flag fraudulent applications. Additionally, Optical Character Recognition (OCR), a technology that converts images of data from documents – such as pay stubs and tax returns – into a machine-readable format, speeds up the application review process. Because AI algorithms can analyze credit risk of loan applications almost instantaneously, decisions are made faster and with less manpower than ever before. Further, AI can calculate credit limits and make tailored lending offers based on a company’s most recent financial activity.
Understandably, AI has caused some concern about the elimination of jobs in the short term, but in the long term, AI can be a great job creator of new markets and new opportunities.
“We’re going to be able to do things in a decade that we could have never conceived of. In the long term, it’s a winner,” McHenry said. “I’m optimistic about AI deployment… It is a game changer. America is adept enough to harness these opportunities and to be at the forefront of the deployment and distribution of AI systems, especially on our most heavily regulated spheres.”
Related: How Small Businesses Might Fare From A Trump Presidency
President Trump has signaled his focus on government efficiency by putting Elon Musk and Vivek Ramaswamy in charge of DOGE, promoting American businesses, and supporting technological advances, such as cryptocurrency and digitization of business lending. Cutting the national debt will be a big challenge, but doing so could lead to lower interest rates, expanded access to capital, and economic growth.
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