How payments get caught up in politics
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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.
Demonstrators outside Trump Tower
Demonstrators hold signs and shout during a rally outside of Trump Tower in New York, U.S., on Monday, Aug. 14 , 2017. Hours ahead of President Donald Trump's return to his midtown Manhattan apartment for the first time since taking office, thousands of people took to the city streets to protest his response over the weekend to violence at a white nationalist rally in Charlottesville, Virginia. Photographer: 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 archived here. 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 told VentureBeat: “A donation to any site that would abuse, harass, threaten, or promote violence against others would violate our terms of service.”
Julian Assange
Julian Assange, founder of WikiLeaks, holds up a fist before speaking to media and supporters from a balcony at the Ecuadorian embassy in London, U.K., on on Friday, May 19, 2017. Assange hailed a Swedish decision to drop a rape probe against him, but said he won't leave the Ecuadorian embassy in London where he has sought refuge for the past five years as long as he remains a target in the U.S. and U.K. Photographer: Luke MacGregor/Bloomberg


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 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."
Lovability condoms

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.
Donald Trump July 2017
U.S. President Donald Trump speaks during the "Celebrate Freedom" event at the John F. Kennedy Center for the Performing Arts in Washington, D.C., U.S., on Saturday, July 1, 2017. Trump returned to the relatively calm waters of patriotism and supporting American troops in a speech on Saturday night that followed several outbursts against the media and others on social media earlier in the day. Photographer: Olivier Douliery/Bloomberg

Trump's cross-border payments wall

President Donald Trump’s well-publicized plan to build a border wall and make Mexico pay for it could have significant ramifications for a major sector of the payments industry.

Trump has stated that the U.S. would suspend remittances to Mexico if it did not agree to cover the estimated $10 billion cost of building the wall. That is no small threat; Mexico is the fourth largest recipient of remittances globally, about $28 billion in 2016, according to the World Bank. Some $24 billion of that comes from the U.S., according to Aite Group, which estimates the total remittance market in 2015 was $582 billion.

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 rearrange how digital technology executes payments.

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.
Ajay Banga, ceo of mastercard
Ajay Banga, chief executive officer of MasterCard Inc., gestures as he speaks during a news conference at the Mobile World Congress in Barcelona, Spain, on Tuesday, March 3, 2015. The event, which generates several hundred million euros in revenue for the city of Barcelona each year, also means the world for a week turns its attention back to Europe for the latest in technology, despite a lagging ecosystem. Photographer: Pau Barrena/Bloomberg *** Local Caption *** Ajay Banga

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."
paypal sign
PayPal signage is displayed in front of eBay Inc. headquarters in San Jose, California, U.S., on Tuesday, Sept. 30, 2014. EBay Inc. is spinning off its PayPal division, heeding demands by activist shareholder Carl Icahn and giving the business independence it can use to contend with rising competition from Apple Inc. and Google Inc. Photographer: 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 already hired new staff in other locations, according to the Charlotte Observer.

PayPal later joined other companies in protesting a similar bathroom bill in Texas.
Marijuana clone plants
Marijuana clone plants grow at the Smokey Point Productions facility in Arlington, Washington, U.S., on Thursday, Jan. 12, 2017. The increasing supply of legal marijuana is turning into a major buzz kill for growers as prices plunge -- and an opportunity for companies that can help cut production costs. Photographer: 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.
Alipay signage
Signage for Ant Financial Services Group's Alipay payment system, an affiliate of Alibaba Group Holding Ltd., is displayed on a store entrance in Shanghai, China, on Wednesday, Aug. 31, 2016. About 200 million consumers use Alipay at physical stores because of the ease and speed at which consumers can make purchases. Photographer: 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 to support 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."