MasterCard, Visa & the Payment-Mafia - Why Payment is Messed Up
We've come to a point in time in which technically, everyone can accept payments for their online-shop via Shopify + PayPal. Every developer can integrate Stripe payments with a vast amount of security features and risk-management to protect against fraudulent transactions.
Technology is - as always - at it's peak, payments can be implemented technically easier than at any time before. Businesses can start accepting payments as professionally as huge giants like Netflix or Spotify.
But what's with this emphasis on technically? Well, there is one big fat problem.
Not Everyone is Welcome
PayPal refuses to accept payments for some people. Let's take a look at the Prohibited Activities section of their Acceptable Use Policy:
Of course some of these activities are simply illegal, so it's not necessarily bad that they ban those activities (more about that later) - but things like "items that are considered obscene" (2.g) or "certain sexually oriented materials" (2.i)?
This includes all kinds of adult content, be it sexual services or art that is of sexual nature (videography, paintings, literature, ...)!
Well, people can then just take payments via Stripe, right?
No they can't, Stripe prohibits this too:
They, too, ban honest, adult-themed work. It's not only them though, Mollie doesn't accept such things either:
Every payment processor has a list of prohibited activities, and adult content is included in almost every payment processor's list.
There are only very few payment processors that willingly accept adult themed content, but in return they take somewhere between 12% and 17% of the transaction instead of the default 1.5-2.5% taken by PayPal, Stripe or Mollie.
Why do they all prohibit adult topics? Neither PayPal, Stripe, Mollie nor any other payment processor themselves are the reason for that.
The Source
Let me introduce you to MasterCard & Visa. In our world, they are the ones who create and control (the majority of) credit-cards and the ones who have power over them.
The source of many of these prohibited activities lies here. What's the reason they name publicly for refusing service? The top 2 reasons are "brand-damaging content" and "high-risk transaction".
Brand Damage
Brand-Damaging is hard to argue because it's not measurable, at least not on a per-case basis. But apart from that ... all the C-Level executives at MasterCard and Visa are not consuming any kind of erotica, then? Did I understand that right?
I don't like calling people out, but the courtesy ends when they call out adult content as "brand-damaging". Some people do their living with stuff you call "brand-damaging".
It's not even like MasterCard or Visa would really be tied to the product that could be "brand damaging". Everyone knows they are buying something from xyz-site and only the payment is done via their card. No one assumes that the card-network affiliates for the content. The card is only a tool.
A hammer wouldn't be affiliated with murder, just because someone used it that way. No one would think bad about a workbench brand just because one of their tools has been used for murder in the past.
High-Risk Transaction
The high-risk problem is something they really have to put the blame on themselves.
For anyone not in fin-tech: Customers that purchased via card can request a chargeback for transactions from their banks for a variety of reasons (like credit card was stolen, hacked, I didn't receive the item, and so on).
Those chargebacks are a critical hit (as if the customer rolled a 20) to the merchant because they not only have to give the money back by default, they pay a chargeback-fee ranging from 10$ to 100$.
The merchant can fight the case to get the transaction back, but the chargeback fee is always used for paying for the dispute-resolution and dispute in general. It's like legal fees, but the merchant always has to pay, even if they're in the right and can provide evidence.
This mechanic has been implemented by Card-Networks like MasterCard and Visa in the early times, when people were too afraid of getting a card that had access to their bank account and could be hacked or stolen. It's a relic of the past and should not exist in this way anymore.
Why does risk even matter? Transactions should only work when authorized and with the 3DS getting mandatory in more and more countries, it should not be the merchant's fault when someone exposes their passwords or looses their cards. There should be no bailing-out of transactions without real, severe consequences.
At the moment, customers have nothing to lose by filing a chargeback with their bank, it's why this technique is also called friendly fraud.
Why This is a Bigger Problem than You Think
MasterCard recently disabled payments for Pornhub because of a reason that may or may not be legitimate. The problem lies not in why they banned Pornhub or that it was Pornhub. It lies in the fact that MasterCard decided that on their own.
They are no authority nor regulator, but if they add something to their policy, everyone has to bow the knee or else.
Is it reasonable for a company to have the power to shut down businesses just like that? Why is the power to take payments centralized to just 2 or 3 very large companies (which are by the way not even authorities, but corporations)?
MasterCard and Visa if you read this, of course all the above was a joke. I love you and your decisions, pls don't cancel my card or blacklist me.
Epilogue
Payment should not be as centralized as it is.
If two people want to transact money from one place to another, there shouldn't be some sort of company that decides whether that is acceptable use or not.
Yes, it's MasterCard's and Visa's cards, so they make the rules (that's also the only reason for this being legal), but here's a quote for ya:
With great power comes great responsibility
Further Readings
Danny O'Brien and rainey Reitman
rainey Reitman
Chris Mills Rodrigo