While developers iterate and reformers wait for a global currency solution, networks of payment processors could serve as a stepping stone to develop solutions in an incremental manner.
Payment networks are already global. Created in 1973, the SWIFT network hosts a messaging platform through which international payments are made, across currencies. Daily volume averages $5 trillion. The credit card networks such as Visa and Mastercard facilitate an estimated 1.98 billion transactions per day.
Restrictions on payment networks are already used to enforce international policy priorities. Russian banks were cut off from major credit cards, Apple Pay and the SWIFT network at the start of the 2022 Russia-Ukraine war as a key mechanism of international punishment. The US Treasury’s Office of Foreign Asset Control maintains a Specially Designated and Blocked Persons List as a mechanism to issue sanctions against terrorists and other parties that the US government wants to block from international travel or prevent from participating in the global financial system.
These payment and finance networks are governed by a patchwork of national legislation, international treaties and oversight bodies including the EU, the UN, the Financial Action Task Force, the Basel Committee on Banking Supervision, national level banks and other parties. Could new payment processors and policies be created, if the goal is to transcend the restrictions of nation-state politics? Could a global agreement among payment processors serve as a new layer of global governance that supplements existing structures? Transaction fees of payments already go up and down according to the type of merchant account and the perceived risks of the vendors and users involved. Extrapolating on that risk calculus to develop regulatory oversight mechanisms is not a far stretch, especially given that such mechanisms are already in place.
Payment processors manage vendors according to Merchant Category Codes, taking guidance from ISO standard 18245. Vendors that are categorized as “high risk,” like online gambling providers, are required to pay higher transaction fees and often see their transactions blocked. New Merchant Category Codes could be developed and charged according to compliance with global commons directives that are issued by a global commons fund or a new global citizen body. Technical Committee 68 of the International Standards Organization oversees the design and allocation of these codes, and could serve as an enforcement mechanism for policy recommendations of global citizen deliberation processes. New paytech and fintech entrepreneurs could promote compliance with such mechanisms to differentiate themselves with merchants and consumers. The Paytech Book, published by Wiley in 2020, gives an industry overview of how innovations are made in the payment sector, with one contributor declaring that “payments are political.” One historic example includes the decision by payment processors to block donations to Wikileaks in 2010 after the organization released documents that were embarrassing to the US government. If payment processors enforce mandates from governments already, then why not from a new global citizen group?
| Philanthropists and grantmakers who seek to learn more about the payments sector should study the work of the Better than Cash Alliance, the Center for Payments, the Electronic Transactions Association and the 2022 book Driverless Finance, by Hillary J. Allen, which explores the risks that the fintech industry poses to the payments sector and the global financial system. |