Among the many ramifications of the recent Capitol riots are their impact on Section 230 protections. The account restrictions instituted by tech firms in the aftermath on US President Donald Trump (and associated entities) have been unprecedented for a US political leader of his prominence.

As of now, restrictions have been instituted by: Twitter (permanent ban), Facebook and Instagram (indefinite ban), YouTube (1-week suspension), Snapchat (permanent ban), Twitch (indefinite ban), Stripe (discontinuation of payments processing for fundraising), and Shopify (termination of merchandise stores).

Other tech firms have placed restrictions on conservative social platform Parler for content supporting the Capitol violence. Parler, which claims 12M+ users, has seen bans by Amazon (discontinuation of AWS cloud services), Google and Apple (removal from app stores), Slack (cancellation of team/community messaging), Zendesk (suspension of customer support), ScyllaDB (shutdown of its database), Twilio (indefinite suspension of SMS authentication), and Okta (discontinuation of login/identity services). With Google, IBM and Oracle refusing to host Parler, it’s not clear whether Parler will be able to find alternatives that can serve its scale.

Other online communities seeing bans include r/donaldtrump on Reddit, certain hashtags on TikTok and Pinterest (e.g. #stopthesteal), and The Donald on Discord. PayPal and GoFundMe have also cut ties with groups raising money for Capitol rioters.

The tech firms have pointed to policy violations as their rationale. However, the weight of so many tech firms moving in unison if not in concert to “deplatform” a major political figure have left people on both sides of the aisle uneasy – including world leaders such as German chancellor Angela Merkel and Mexican president Andrés Manuel López Obrador. Others have taken issue with tech firms effectively shutting down Parler, a platform that explicitly aligns itself with “free speech.”

Some are calling for changes to the Section 230 protections of the Communications Decency Act (1996). Section 230 is the most important law addressing liability for online speech, especially this critical line: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." Its protections (which have exceptions, e.g. child pornography) laid the groundwork for a modern internet with social media, user-generated video, wiki-based encyclopedias, search, self-publishing, online reviews, communities, and comment sections.

Section 230’s original intent was to encourage self-moderation of content like pornography, and allow platforms to apply their own rules “in good faith” without being held liable for user-generated content. The alternatives to Section 230 were generally viewed at the time to be no moderation (avoiding liability as a distributor) or no user-generated content (avoiding liability as a publisher) – not political neutrality or rigorous moderation.

That said, the world has changed and big tech has amassed scale and power worrisome to people on both sides. Democrats have long been seeking more moderation, while Republicans are demanding less – and both have threatened to use Section 230 protections removal as a bludgeon. Trump issued an executive order in May 2020 that called on the US FCC to clarify the definition of “good faith.” The order has had little impact to date – after the Capitol riots, outgoing chairman Ajit Pai said he would not move forward with Section 230 rule-making in his remaining time.

The public moderation of Trump is likely to have implications for Section 230’s future direction, setting the stage for how President-elect Joe Biden’s incoming administration addresses big tech power. Biden himself has been a critic of Section 230, saying in Jan 2020 that it should be “revoked, immediately” – though it’s not clear how committed he is to that position. The step-up in policing of Trump could be big tech’s way of posturing to the Biden administration that they are serious about moderation.

Given the vast ramifications of overturning Section 230, it is more likely that it will be edited or replaced rather than removed altogether. A wide range of alternatives could play out – revisions could focus on more moderation, or more consistent moderation, or more unbiased moderation, or greater transparency around moderation, or independent oversight of moderation.

Biden incoming deputy chief of staff Bruce Reed has suggested “throwing out Section 230 and starting over.” He emphasizes approaches such as establishing prerequisites for immunity and accountability for revenue-generating content (e.g. with ads). Platforms could also be more liable for specific types of content (e.g. revenge porn, extremism). Section 230 is already being chipped away with a 2018 law removing safe harbor protections for knowingly facilitating sex trafficking.

Section 230 is separate from Parler’s shutdown. That situation is about Parler’s business partners – which are private companies and not public utilities – cutting ties based on policy violations and desire not to be associated with Parler. Though Parler is suing Amazon, the case seems to be largely an attempt to get reinstated. Over the long haul, however, it opens the question of who serves as gatekeepers to the most important networks of exchange today and reminds us that competition is generally a good thing.

Oct 9 2020 (3 Shifts): Social media tries to encourage more civil conversations

May 29 2020 (3 Shifts): Trump’s executive order threatens to make tech platforms liable for user content

Under pressure of the US Department of Justice (DOJ) antitrust lawsuit filed Nov 2020, Visa and financial API startup Plaid this week mutually agreed to terminate the planned $5.3B acquisition originally announced Jan 2020. While Visa believed it would win, it ultimately decided it wasn’t worth a multiyear legal battle (and potential scrutiny of how it sets fees). Plaid will continue to “work with Visa as an investor and partner,” with Visa holding onto its minority stake.

Visa had intended for Plaid – which connects bank accounts to financial apps – to help drive its “network of networks” strategy (the movement of money anywhere at scale globally). Visa’s stated rationales for acquiring Plaid had included access to Plaid’s fintech customers, bank-account authentication, and open-banking solutions for clients.

Where Visa ran into antitrust issues was in the realm of less explicit rationales – i.e. how Plaid could help Visa fend off threats. Plaid as a standalone business was not that meaningful for Visa, which generates $22B in revenue annually. Where it was meaningful was in how Plaid could help Visa ensure its continued dominance in future scenarios. The most serious threat to Visa has been the shift to bank accounts as funding sources, particularly ACH payments. The DOJ’s antitrust suit specifically highlighted Visa’s CEO’s description of the acquisition as an “insurance policy” that could help neutralize a “threat to our important US debit business.”

In contrast, the DOJ in Nov 2020 approved rival Mastercard’s $825M acquisition of Finicity – a financial API firm similar to Plaid – in part based on Mastercard’s smaller footprint in online debit. Visa controls 70% of online debit transactions vs. Mastercard’s 25%. According to the DOJ, Plaid had been developing a lower-cost option for online debit payments. While it’s unlikely Visa wanted to spend $5.3B to kill Plaid, certainly having the power to choke adoption of ACH – or at least own a control point – would have been a compelling factor.

Plaid, meanwhile, seems well-positioned to prosper. Its potential to disrupt debit cards and drive down fees still stands – and is probably strengthened. Paying Plaid customers have shot up 60%+ since the acquisition was announced, reaching 4,000+ clients. It’s also added “hundreds of banks” to its network. Venture capitalists have suggested that Plaid’s price was undervalued relative to what it could become, with a Plaid board member saying the opportunity was $50B+ rather than $5B.

Given how prominent the Visa-Plaid deal has been in the industry, its reversal could have far-ranging effects. Plaid’s continued independence will be a source of continued innovation and competition. (Industry watchers believe Plaid is likely to go public now, possibly via SPAC or direct listing – though TechCrunch had the impression from Plaid’s CEO that this may be a few years out.)

The reversal could also have a negative impact on fundraising by other fintechs, by making it harder to buy a leading player, putting a damper on future acquisitions by Visa (a notable strategic acquirer for fintechs), and making investors acutely aware that a frothy exit isn’t a done deal.

Nov 20 2020 (3 Shifts): US DOJ approves Mastercard’s Finicity acquisition – while continuing its Visa-Plaid suit

Feb 7 2020 (Brief #22): Visa’s $5.3B bet on Plaid & the pathway to open banking

This week, Walmart announced a new fintech startup in strategic partnership with powerhouse fintech VC Ribbit Capital, to be majority-owned by Walmart. Details – including the startup’s name – are limited at this point, but the new venture is described as delivering “tech-driven financial experiences tailored to Walmart’s customers and associates.” According to Walmart, “millions of customers...[have] made it clear they want more from us in the financial services arena.” For Walmart, this could be yet another way to bring value to its customers, increase its share of wallet, and gather more customer data.

Ribbit Capital’s mantra is “to change the world of finance.” According to Ribbit, “Our goal isn’t just to write checks. It’s to deposit ideas.” It has backed Robinhood, Coinbase, Wealthfront, Affirm, Credit Karma, Brex, Revolut, Gusto and BharatPe, among many others. With that in mind, the new venture’s goals are likely to be ambitious. Walmart has emphasized that growth for the venture may come through partnerships and acquisitions with leading fintechs – many of which already reside in Ribbit’s portfolio.

Walmart already offers an array of financial services to customers in conjunction with partners. It has the Walmart Credit Card (with Capital One); a range of reloadable debit cards and bank accounts (e.g. Walmart Money Card with Green Dot Bank, Bluebird by American Express, Netspend Visa); mobile payment app Walmart Pay; and in-store installment financing (with Affirm), money transfer (with Ria and MoneyGram), check cashing, bill pay, tax prep, and other services. (Walmart also has a stake in major Indian payments player PhonePe through its Flipkart ecommerce affiliate.) According to the recent announcement, “Walmart will continue to serve customers through its existing financial services and partnerships” – though this language may be driven in part by a desire not to disrupt existing relationships.

The new venture could have ties to Walmart’s ecommerce and online grocery business or its growing Walmart+ membership – both areas of strength over the past year. In Q3 2021, its US ecommerce business grew 79% year-over-year, driven partly by the pandemic and an uptick in online grocery orders. As of Nov 2020, 16-17% of consumers in surveys reported having a membership to Walmart+ (which only launched in Sep 2020); an estimated 19M households signed up to Walmart+ in its first two months.

Walmart has demonstrated willingness to take new risks – in some cases, following in the footsteps of competitors Amazon and Alibaba (who both have significant forays in financial services). This new venture parallels other efforts by Walmart to complement and diversify beyond its core retail business, including a partnership with Shopify to bring more 3rd-party sellers onto its Walmart Marketplace, launch of a self-serve advertising platform, and expansion into health insurance. The current venture could signal Walmart’s intention to target a younger demographic with digital financial services (analogous to its interest in TikTok).

Walmart has long had ambitions to own a bank, only abandoning its pursuit of an industrial loan charter in the early 2000s in the face of regulatory friction. However, more recently in Dec 2020, the FDIC passed a rule making the pathway to acquiring industrial loan charters easier for companies like Walmart. Depending on how the fintech venture takes shape, we could see Walmart go down this path again.

For Ribbit, this partnership could be a powerful way to advance both its mission and portfolio companies. Walmart has 275M+ customers visiting its stores and ecommerce sites each week, unique access to underbanked consumers, and a trove of valuable data. Most of its portfolio startups would benefit from being able to tap Walmart’s incredible channel. With the new venture, Ribbit also has the opportunity to invent new offerings that address the holes in the market, and, in their words, “deposit” some ideas.

Jun 19 2020 (3 Shifts): Walmart will integrate with Shopify, adding 1,200 Shopify merchants to its 3rd-party marketplace

Mar 26 2020 (Brief #27): Grocery delivery, ecommerce & the renewal of Walmart