8 times payments clashed with politics
August 18, 2017 10:16 AM
The simple act of moving money can have a big impact on any political movement, so banks and payment networks are often caught up in issues of national importance. Here are some recent instances where payments and politics came head-to-head.
Jeenah Moon/Bloomberg
Undermining extremists
Groups like the neo-Nazi blog The Daily Stormer have long struggled to accept donations despite being cut off by banks, PayPal and other providers. What's happening now is those providers are closing off the last loopholes — and these moves raise strong concerns for anyone who moves money electronically.
For example, The Daily Stormer reported in February that it had been cut off by Coinbase, a digital currency exchange; at the same time, the publication also got cut off by the building at which it had been receiving mailed donations. (The Daily Stormer has been taken offline as of this writing, but the original post is archivedhere . Warning: strong language.)
Supporters were still able to use Coinbase to send bitcoin donations, even though The Daily Stormer wasn't able to work with Coinbase to receive them. As of this week, Coinbase has reportedly started targeting donors.
In a recent tweet on one of its now-deleted accounts, The Daily Stormer said: "Bitcoin has slowed to a trickle. Coinbase is canceling the accounts of anyone who transfers to us."
Don't just take the neo-Nazis' word for it. In an emailed statement, Coinbase said: "Although we do not comment on specific individuals, Coinbase prohibits use of an account which would abuse, harass, threaten, or promote violence against others. Coinbase continues to take action to enforce this policy across our platform, including to restrict access to Coinbase services and to close accounts."
When asked to clarify Coinbase’s policy, a spokesperson toldVentureBeat : “A donation to any site that would abuse, harass, threaten, or promote violence against others would violate our terms of service.”
For example, The Daily Stormer reported in February that it had been cut off by Coinbase, a digital currency exchange; at the same time, the publication also got cut off by the building at which it had been receiving mailed donations. (The Daily Stormer has been taken offline as of this writing, but the original post is archived
Supporters were still able to use Coinbase to send bitcoin donations, even though The Daily Stormer wasn't able to work with Coinbase to receive them. As of this week, Coinbase has reportedly started targeting donors.
In a recent tweet on one of its now-deleted accounts, The Daily Stormer said: "Bitcoin has slowed to a trickle. Coinbase is canceling the accounts of anyone who transfers to us."
Don't just take the neo-Nazis' word for it. In an emailed statement, Coinbase said: "Although we do not comment on specific individuals, Coinbase prohibits use of an account which would abuse, harass, threaten, or promote violence against others. Coinbase continues to take action to enforce this policy across our platform, including to restrict access to Coinbase services and to close accounts."
When asked to clarify Coinbase’s policy, a spokesperson told
Luke MacGregor/Bloomberg
WikiLeaks
An older example that's still relevant today is WikiLeaks , which lost its ability to accept payments via PayPal, Mastercard and Visa after the website exposed thousands of classified documents in 2010. WikiLeaks founder Julian Assange was also personally affected; Switzerland's PostFinance reportedly closed one of his personal accounts as well.
The payments companies faced a strong backlash for their stance. PayPal, Mastercard and Visa found themselves suffering from a series of denial of service attacks meant to disrupt their operations by overwhelming some systems with internet traffic.
Mastercard's SecureCode system, a version of 3-D Secure, was affected. Visa's public website was inaccessible briefly as well, and PayPal suffered a similar onslaught but kept its website running.
"We are glad to tell you that http://www.mastercard.com/ is down and it's confirmed!" said Operation Payback, the hacker group that claimed credit for the outage, on its Twitter account. "There are some things Wikileaks can't do. For everything else, there's Operation Payback."
The payments companies faced a strong backlash for their stance. PayPal, Mastercard and Visa found themselves suffering from a series of denial of service attacks meant to disrupt their operations by overwhelming some systems with internet traffic.
Mastercard's SecureCode system, a version of 3-D Secure, was affected. Visa's public website was inaccessible briefly as well, and PayPal suffered a similar onslaught but kept its website running.
"We are glad to tell you that http://www.mastercard.com/ is down and it's confirmed!" said Operation Payback, the hacker group that claimed credit for the outage, on its Twitter account. "There are some things Wikileaks can't do. For everything else, there's Operation Payback."
Caught in Choke Point
Perhaps the most mainstream example — and thus the most extreme form of bank censorship — was JPMorgan Chase's 2014 refusal to handle payments for Lovability , which sells condoms to women.
At the time, that move was seen as a consequence of Operation Choke Point, a program by the Department of Justice that sought to block payday lenders and other fraudsters by going after the banks that service them.
Tiffany Gaines, president of Lovability, told American Banker at the time that small banks were more willing to work with her.
At the time, that move was seen as a consequence of Operation Choke Point, a program by the Department of Justice that sought to block payday lenders and other fraudsters by going after the banks that service them.
Tiffany Gaines, president of Lovability, told American Banker at the time that small banks were more willing to work with her.
Olivier Douliery/Bloomberg
Trump's cross-border payments wall
Remittance is big business for the U.S., too. The United States is the world’s biggest sender of remittances worldwide, with nearly $135 billion flowing to other countries each year, according to WorldRemit Corp.
The use of remittance as a bargaining tool would take an immediate chunk out of Mexico's economy, potentially damage U.S. companies and unintentionally
There's a question of whether Trump can cut off remittance to Mexico, either politically or logistically.
The logistical challenges involve how funds are transferred. For Western Union or MoneyGram remittances, in which someone wires money via brick and mortar stores, the trail is easier to follow and theoretically easier to shut off because there's a location on each side of the border. But lots of payments are now made through mobile apps, where the origination and destination of the account is less easy to discern.
Pau Barrena/Bloomberg
Taking on the travel ban
Technology and payments providers alike were worried that President Donald Trump's surprise January executive order on immigration would hurt research and development and create difficulties for international employees.
"I am an immigrant to this wonderful country," Mastercard CEO Ajay Banga said in a Jan. 30 memo to employees. Banga, who has been CEO at Purchase, N.Y.-based Mastercard since 2010, grew up and attended schools in India. "I came here midway through my career and have, over the past years, made this my home and pledged my allegiance to all that the Constitution stands for."
Banga went on to say America has offered his family "all sorts of opportunities and joys," citing the education his daughters have received and the career he has been able to enjoy.
The diversity of Mastercard's workforce is "our strongest weapon to be innovative and creative," Banga said. "In our industry, with its pace of change, surrounding yourself with people who don't look like you and have had different experiences from you is the best way to ensure you don't have some blind spots, that you are get differing points of view and that you feel the pressure and pleasure of designing products and services for a diverse world."
Trump's original executive order barred people from mostly Muslim countries, including Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen, from entering the U.S. for at least 90 days. The White House declared that green card holders from those countries won't be barred from entry, but confusion reigned in the first days of the policy change, leading many concerned about what could be next and how it affects global employees.
Banga admitted the direct impact of the executive order on Mastercard may be limited, but noted, "What affects one of us, affects all of us."
"I am an immigrant to this wonderful country," Mastercard CEO Ajay Banga said in a Jan. 30 memo to employees. Banga, who has been CEO at Purchase, N.Y.-based Mastercard since 2010, grew up and attended schools in India. "I came here midway through my career and have, over the past years, made this my home and pledged my allegiance to all that the Constitution stands for."
Banga went on to say America has offered his family "all sorts of opportunities and joys," citing the education his daughters have received and the career he has been able to enjoy.
The diversity of Mastercard's workforce is "our strongest weapon to be innovative and creative," Banga said. "In our industry, with its pace of change, surrounding yourself with people who don't look like you and have had different experiences from you is the best way to ensure you don't have some blind spots, that you are get differing points of view and that you feel the pressure and pleasure of designing products and services for a diverse world."
Trump's original executive order barred people from mostly Muslim countries, including Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen, from entering the U.S. for at least 90 days. The White House declared that green card holders from those countries won't be barred from entry, but confusion reigned in the first days of the policy change, leading many concerned about what could be next and how it affects global employees.
Banga admitted the direct impact of the executive order on Mastercard may be limited, but noted, "What affects one of us, affects all of us."
David Paul Morris/Bloomberg
Bathroom bill
PayPal took a stand against North Carolina's "bathroom bill," designed to dictate which bathrooms LGBT people could use in the state. The California-based payments company announced in March that it would scrap plans for a facility that would have brought an estimated $2.66 billion to the state's economy, according to The Associated Press.
This was no idle threat; even following the bill's repeal, PayPal was not expected to return to its original plans, having alreadyhired new staff in other locations, according to the Charlotte Observer.
PayPal later joined other companies in protesting a similar bathroom bill inTexas .
This was no idle threat; even following the bill's repeal, PayPal was not expected to return to its original plans, having already
PayPal later joined other companies in protesting a similar bathroom bill in
David Ryder/Bloomberg
A legal gray area
Though recreational pot is legal in a number of U.S. states, big banks don’t want to work with cannabis sellers. And that is unlikely to change anytime soon.
Part of the issue is regulation — most banks are averse to marijuana's hazy legal footing — but a growing number of workarounds can help make these businesses less cash-based. The problem is these workarounds aren't as seamless as simply paying by credit or debit card at any other store.
“We’re in a gray area and everybody will have to deal with that,” said Eveline Dang, vice president at Cannapay, a vendor to the legal cannabis industry. “In terms of service providers, it’s our job to provide merchants with the right tools and systems and solutions that they will use to make sure they use them properly to be compliant in every way possible.”
Cannapay is part of an emerging category of providers implementing creative ways to make cannabis payments seem more digital than they actually are. The options include cashless ATMs (which initiate transfers when a customer inserts a debit card) and e-checks.
The drawback of these systems is that point of sale technology isn't designed to interact with them, making implementation often seem like assembling a massive jigsaw puzzle.
“POS systems typically are the core of the business with merchant payments, but now the way that POS systems and payment systems work is that it’s like a work around solution,” Dang said.
Part of the issue is regulation — most banks are averse to marijuana's hazy legal footing — but a growing number of workarounds can help make these businesses less cash-based. The problem is these workarounds aren't as seamless as simply paying by credit or debit card at any other store.
“We’re in a gray area and everybody will have to deal with that,” said Eveline Dang, vice president at Cannapay, a vendor to the legal cannabis industry. “In terms of service providers, it’s our job to provide merchants with the right tools and systems and solutions that they will use to make sure they use them properly to be compliant in every way possible.”
Cannapay is part of an emerging category of providers implementing creative ways to make cannabis payments seem more digital than they actually are. The options include cashless ATMs (which initiate transfers when a customer inserts a debit card) and e-checks.
The drawback of these systems is that point of sale technology isn't designed to interact with them, making implementation often seem like assembling a massive jigsaw puzzle.
“POS systems typically are the core of the business with merchant payments, but now the way that POS systems and payment systems work is that it’s like a work around solution,” Dang said.
Qilai Shen/Bloomberg
Business in China
The U.S.-to-China payments corridor is one of the biggest in the world, according to the most recent World Bank data. It is dwarfed only by the U.S.-to-Mexico corridor, which the Trump campaign targeted as part of its border wall plan.
This puts China-based Ant Financial's pending acquisition of U.S.-based MoneyGram in a difficult position. Rival bidder Euronet, which is based in Kansas, has emphasized the potential regulatory and political issues of Ant's proposed acquisition.
Observers say a key advantage of Euronet’s offer is that the deal doesn’t require review by the Committee on Foreign Investment in the United States, an agency that has challenged other Chinese companies' moves to buy U.S. companies.
Euronet also attempted to top Ant's original bid of $880 million with a $1 billion offer, but Ant quickly countered with an offer of $1.2 billion. Ant is also lining up partnerships tosupport the Alipay wallet in the U.S. and Canada.
"The political environment could have helped to keep the price for MoneyGram down," said Sarah Grotta, director of the debit advisory service at Mercator. "The uncertainty around taxes (on) U.S. to Mexico remittances — or the potential to have remittance stopped altogether — doesn't help the near term outlook."
This puts China-based Ant Financial's pending acquisition of U.S.-based MoneyGram in a difficult position. Rival bidder Euronet, which is based in Kansas, has emphasized the potential regulatory and political issues of Ant's proposed acquisition.
Observers say a key advantage of Euronet’s offer is that the deal doesn’t require review by the Committee on Foreign Investment in the United States, an agency that has challenged other Chinese companies' moves to buy U.S. companies.
Euronet also attempted to top Ant's original bid of $880 million with a $1 billion offer, but Ant quickly countered with an offer of $1.2 billion. Ant is also lining up partnerships to
"The political environment could have helped to keep the price for MoneyGram down," said Sarah Grotta, director of the debit advisory service at Mercator. "The uncertainty around taxes (on) U.S. to Mexico remittances — or the potential to have remittance stopped altogether — doesn't help the near term outlook."
