From sex to free speech, what goes online is increasingly up to financial companies
Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Plastic Policemen: Credit-card firms are becoming reluctant regulators of the web
The Economist | Oct 10, 2021
From sex to free speech, what goes online is increasingly up to financial companies
WHO SHOULD police the internet? For some time now the question has tied companies, regulators and campaigners in knots. Social networks spend billions moderating content posted on their platforms, but are still criticised either for not removing enough toxic material or for stifling free speech. They are not the only ones to grapple with the problem. Banks and credit-card companies too are finding themselves playing a bigger role in what is said and done in the public square—to their, and their customers’, discomfort.
See: Bank of Canada to become new regulator of fintech companies doing payments processing
Now the boundary of censorship is being extended further, into the pornography business. From October 15th adult websites worldwide will have to verify the age and identity of anyone featured in a picture or video, as well as the ID of the person uploading it. They will need to operate a fast complaints process, and will have to review all content before publication. These requirements are being imposed not by regulators but by Mastercard, a credit-card giant.
Websites can always choose not to work with Mastercard. But given that the company handles about 30% of all card payments made outside China, to do so would be costly. Visa, which manages a further 60% of payments, is also taking a firmer line on adult sites. And the trend goes beyond porn. In the shadier corners of the web, and in industries where the law is unclear or out of date, financial firms are finding themselves acting as de facto regulators.
Payments have become a tool of domestic and international policy,” says Aaron Klein of the Brookings Institution
Since the turn of the century, “payments have become a tool of domestic and international policy,” says Aaron Klein of the Brookings Institution, a think-tank. After the 9/11 attacks of 2001 America introduced new anti-money-laundering rules and more targeted sanctions. This system—a “21st-century precision-guided munition”, as a former head of the CIA called it—obliges financial firms to block payments to the individuals on a list which today runs to 1,604 pages.
See: Payments without banks goes mainstream with Twitter on Bitcoin Lightning Network
Handing enforcement duties to companies relieves the taxpayer of some of the cost. Compliance departments at firms, meanwhile, have ballooned. It is not unusual for big banks, such as HSBC or JPMorgan Chase, to employ 3,000-5,000 specialists focused on fighting financial crime, and more than 20,000 overall in risk and compliance. In 2017 Accenture, a consultancy, reckoned that tech firms employed around 100,000 content moderators.
Payment companies in particular face a philosophical dilemma.
“On one hand they try to be very open, accepting, willing to facilitate payments for whomever. They’re not taking any sort of political or moral stance,” says Lisa Ellis of MoffettNathanson, a research firm. “But on the other hand, they also feel like they have a very strong responsibility in making sure that they’re not aiding and abetting any sort of crime.”
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