Vass Bednar is the managing director of the Canadian SHIELD Institute and co-author of The Big Fix.
Credit card companies were supposed to be boring (apart from the loyalty points): neutral vehicles for moving money. Today, the Visa and Mastercard duopoly wields more power over what we can read, watch and buy than many democratic governments. By quietly expanding their role from transaction processors to global regulators, they now wield state-like power, and Washington is moving to protect their dominance outside of the United States.
What began as risk management in the adult industry has spread into broader creative sectors. Visa and Mastercard famously cut ties with Pornhub in 2020 after allegations that the website featured unlawful content. More recently, under pressure from Collective Shout, an Australian anti-porn advocacy group, both companies reportedly pushed online video game storefronts such as Steam and Itch.io to restrict titles with sexual themes.
For video game developers, being cut off from the credit card networks is a de facto ban – without Visa or Mastercard, there’s no mainstream distribution. While Ottawa struggles to legislate online harms through public policy, these companies are enforcing opaque rules at their own discretion because of external pressures. A mechanism meant to facilitate payments has become a tool of cultural censorship in the absence of clear regulation from the government.
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Another arena of their influence is trade.
Brazil’s Pix is a free, state-run instant payment system that launched in 2020. It quickly revolutionized access to finance in the country, reaching three-quarters of Brazilians in four years, according to the country’s central bank. By offering instant, no-fee transfers, Pix dramatically undercut Visa and Mastercard’s high-cost models. It’s sort of like a Brazilian Interac.
Pix has been a runaway success because it solved problems Visa and Mastercard never cared to address. Brazilians were tired of high swipe fees that merchants often passed on to consumers, and of slow settlement times that made everyday payments costly and inconvenient. Built and mandated by the country’s central bank, Pix offered instant, free transfers between bank accounts, mobile apps and even street vendors, using QR codes.
For merchants, the shift has been equally transformative. Where Visa and Mastercard typically charge between 2 per cent and 5 per cent per transaction, Pix costs them less than 0.5 per cent. For small businesses, that difference can decide survival. Unsurprisingly, Brazilian banks and fintechs quickly integrated Pix and consumers adopted it with enthusiasm. Today, the system handles more transactions than credit and debit cards combined in Brazil, according to central bank data and industry group Abecs.
Rather than celebrate or emulate this financial innovation, in July, the U.S. Trade Representative launched an investigation into the Brazilian government, to determine whether its electronic payment services pose a “discriminatory” barrier to U.S. commerce. The message is clear: When public alternatives succeed, Washington shields private incumbents against sovereign competitors.
The U.S. investigation into platforms such as Pix should therefore be read less as a defence of free trade than as an attempt to preserve the profit margins of American payment giants. If a public platform can outcompete Visa and Mastercard in one of the world’s largest emerging markets, what stops other countries – including Canada – from doing the same through other digital money innovations such as the Real-Time Rail, a new national payment infrastructure being developed by Payments Canada.
The Pix story demonstrates that sovereign payment systems are technically feasible and deeply disruptive to mainstream players. And the backlash shows how quickly Washington will reach for trade tools when American incumbents are threatened by public alternatives.
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Elsewhere, governments are beginning to push back against U.S. digital dominance, albeit gently. Across Europe, a “sovereignty bloc” is emerging: Schleswig-Holstein is migrating 30,000 employees to Linux and LibreOffice, Denmark’s digital ministry is following suit, and in France, Lyon has confirmed its own move away from Microsoft. The EU’s privacy regulator previously ordered that all Microsoft 365 data flows to servers in outside countries, including the U.S., must stop by the end of 2024. Dutch universities, citing risks in Microsoft’s AI tool Copilot, are studying open-source groupware as an alternative. These jurisdictions are actively investing in software that can be hosted locally, freeing them from reliance on American vendors.
As commerce, culture and expression converge, leaving Visa and Mastercard to determine what can and cannot circulate is incompatible with democratic accountability. These are private firms exercising private powers – shaping markets, censoring content in the absence of regulation and even sparking international disputes.
As Canada gets serious about reclaiming digital sovereignty, we should be ready for similar pushback when we make efforts to reduce our reliance on U.S. infrastructures. Visa and Mastercard were never supposed to be regulators. But if we continue to let them exert power over the terms of commerce, Canadians may find that the rules governing what we can buy and build are set not in Parliament, but on Silicon Valley Zoom calls. Credit cards should get back to being boring.