Visa & MasterCard: The Hidden Internet Regulators

The internet may seem like the wild west where there's very little overarching regulation and this is partly because of how global and democratized it is. Most people are under the impression that moderation is up to the host of the websites - which is why 4chan and Reddit offer very different experiences - and that no one is taking on the responsibility of regulating the internet, least of all the government.

One party that often goes overlooked when it comes to regulation is the credit card companies like Visa and Mastercard. Because they are unhappy with facilitating illegal or unethical payments (or rather, the negative brand image that it brings), it often means they have to step in where more formal governing bodies are absent.

Industries are very receptive to requests to block certain content/products because most companies rely on Mastercard and Visa for their income - albeit reluctantly. It shows where the power really lies in society and online: the guys who can turn off the tap at any point.

Gambling regulation and the balance of power

Gambling is no longer taboo, making it more formally regulated. After all, sports gambling sites have become a very routine hobby for many. Countries have their own commissions dedicated to controlling the licensing of casinos, including online casinos, to ensure everything is above board and not predatory. The UK has Gambling Commission, whilst North America has regional bodies of authority, such as the Nova Scotia Alcohol and Gaming Authority.

If there were foul play, MasterCard and Visa have clear rules and do not want such activity to be facilitated through their payment processing infrastructure. One of the many rules to get an idea (MasterCard section 5.1.2.1) "A Merchant must not sell chips or other value that can be used, directly or indirectly, to gamble at locations other than those that the Merchant wholly owns."

However, gambling is an industry that has matured and settled, and they very much know what the rules are - meaning the credit card firms do not need to interfere much here.

In 2020, credit cards were banned in the UK and Germany from being used for gambling. Whilst this was initiated from the local regulation, Visa and MasterCard advised gaming sites to exclude them from the list of available payment options or face losing access to Visa/MasterCard altogether in all markets.

When the US government wanted to interfere during the online poker craze almost 20 years ago, they didn't turn to the internet service providers that allowed access to poker sites, they instead turned to the payment processors. This was the foundation of America's Unlawful Internet Gambling Enforcement Act of 2006.

It highlights how much power they hold because very few ordinary people are going to suddenly replace their spending habits by using Cryptocurrency or a new payment system. Some might, but the impact on cash flow would be heavy.

The real internet police

The advantage that Visa and MasterCard possess is that they're global - unlike regional regulators - meaning they can police the internet on a global scale. The former manages 60% of payments outside of China, whilst the latter handles 30% - a very real monopoly.

Given that regulating bodies are notoriously slow to react to new, shady corners of the web that pop up, they're taking it upon themselves to do the regulating. Blocking the illegal purchasing of drugs and weapons and anti-money laundering was something we foresaw, but we are yet to see the full scale of free speech and other unusual debates that will arise from their increasingly opaque and surreal regulation of the internet.