A Giant Misstep

Tariffs and threats of tariffs can do great harm to U.S. commerce. The payments business is no exception.

President Trump’s barrage of tariff threats and tariffs by executive diktat will pour gasoline on the fire of payments protectionism. America’s payments industry is the most competitive and innovative in the world. It will pay dearly.

The President’s tariffs, retaliatory tariffs, and the resulting increased uncertainty will hike the prices of consumer goods and of parts used by American producers, reduce trade, and cause an economic slowdown, recession, or worse. Growth in domestic and lucrative cross-border payments, consequently, will fall.

U.S. payment systems play

an outsized role globally. The free world, and most of the non-free world, rely on and have trusted these systems. That’s been good for consumers, businesses, and banks worldwide, as well as for the shareholders and employees of American payments companies.

Mastercard and Visa are the two genuinely global retail payment systems and also enjoy dominant positions in many national markets. Tier-two global card networks American Express and Discover/Diners Club have been trying to expand and deepen their footprints abroad to buoy long-term growth, albeit with limited success to date.

Apple Pay, Google Wallet and Pay, and PayPal are leading digital wallets and alternative payment systems in an expanding roster of countries. And U.S. money transfer networks such as Western Union, MoneyGram, and Remitly operate worldwide.

It doesn’t end there. Mastercard and Nebraska-headquartered payments-software gorilla ACI Worldwide provide critical core real-time interbank payments infrastructure for twelve and ten countries, respectively.

Dollar stablecoins issued by Circle, PayPal, Ripple, and Tether are taking a run at playing increased roles in cross-border payments, and in a range of niche payments markets planetwide. While the largest issuer, Tether, is headquartered in El Salvador, its principal stablecoin is a dollar token. After abandoning its ballyhooed Libra stablecoin, social-media colossus Meta appears to be readying a dollar stablecoin.

And, while Swift, the world’s leading interbank cross-border payment messaging network, is Belgian, Washington exercises significant influence by its suzerainty over U.S. money-center banks, through which a disproportionate number of cross-border payments ultimately clear.

Finally, notwithstanding more than a century of debasement, King Dollar remains the world’s reserve currency, a global payment system and a powerful brand.

‘Irreversible Damage’

Payment systems are critical to every economy. But trust is essential.

America’s payment systems have benefited from scale, powerful network effects, and enormous goodwill and trust in the U.S. and in U.S. institutions. But Gerard Baker of The Wall Street Journal contends Trump “is doing irreversible damage to the greatest geopolitical brand ever created.”

In the movie “Ronin,” when Vincent, played by Jean Reno, asks Sam, played by Robert DeNiro, how he knew they would be ambushed, Sam responds, “When there’s doubt, there’s no doubt.” Trump’s bullyragging of friend and foe alike is sowing increased doubt about the prudence of relying on U.S. companies for critical national payments infrastructure. No country wants to be dependent on payment systems it has cause to worry Washington may cut off.

Payment systems are intrinsically win-win. They enable payments which only occur when both the payor and payee, by their own compasses, think they’re better off. Historian and philosopher Yuval Harari contends, “In the Trumpian vision, by contrast, the world is seen as a zero-sum game in which every transaction involves winners and losers.”

In this vision, the “ideal world is a mosaic of fortresses, where countries are separated by high financial, military, cultural, and physical walls.” In such a world, payments protectionism makes sense.

There are degrees of payments protectionism. Most countries have national currencies. Many countries have, and favor, electronic payment systems run by their central banks or national bank consortiums.

Washington has weaponized U.S. payment systems, and the dollar, against a handful of foes. States like China, Iran, North Korea, and Russia, therefore, rely almost exclusively on homegrown systems for domestic payments.

Since its 2001 commitment to the World Trade Organization to completely open up its payments market by 2006, China has stymied Visa, Mastercard, American Express, Discover, and PayPal from establishing more than token toeholds in its enormous domestic payments market.

Russia has been cut off from Visa’s, Mastercard’s, American Express’s, and PayPal’s networks, and, to a large degree, from the dollar-anchored global financial system. Autarkic hermit regime North Korea relies entirely on domestic government-controlled payment systems. Iran’s payment systems are all national.

Resentment on Steroids

However, a mix of public and private domestic and foreign—principally American—payment networks is more common.

While Mastercard and Visa are the leading domestic card-payment networks in Brazil, there is a mix of competing private and public payment systems. The central bank used its regulatory clout to advantage its hugely successful payment network, Pix, over foreign competitors, such as Meta’s WhatsApp Pay.

The mother of all emerging markets, India, mandates that foreign payment systems process in-country. Mindful of the politics, state banks are more likely to use India’s national card network champion, Rupay, than the foreign networks Mastercard and Visa.

Delhi is unhappy that Google Pay and Walmart-backed PhonePe dominate the digital-wallet-anchored alternative payment systems. Both rely heavily on the quasi-governmental National Payments Corporation of India’s real-time payment system, UPI. To check their dominance, the NPCI will limit any individual third-party app to a maximum of 30% of total UPI payments, effective Dec. 31, 2026.

The central bank in southeast Asia’s most populous country, Indonesia, mandated that domestic credit and debit transactions be processed in-country by majority-Indonesian-owned firms. Turkey also requires in-country payment processing, and its national card network champion, Troy, has substantially displaced Mastercard and Visa domestically.

In the European Union, resentment of U.S. payment systems like Mastercard and Visa has long been a totem of politicians’ and regulators’ EU piety. Trump’s tariffs and combative rhetoric are steroids for that resentment and are changing the politics of euro-protectionism.

European Central Bank board member Philip Lane contends, “We are witnessing a global shift towards a more multipolar monetary system, with payments systems and currencies increasingly wielded as instruments of geopolitical influence, and competing jurisdictions seek to assert their independence from foreign monetary powers.”

Lane wants the ECB to issue a digital euro, hoping it would “play a crucial role in strengthening the strategic autonomy of Europe in an increasingly fragmented geopolitical landscape.”

Singing from the same hymnal, ECB president Christine Lagarde complains, “…when you do e-commerce, peer-to-peer, or you use your card or phone, you always rely on non-European (principally U.S.) infrastructure.” She wants “a degree of independence” in how money moves around Europe, advocating a pan-EU digital platform to avoid dependency on the US.

Would-be European payment-system challengers, such as Monnet, the Euro Alliance of Payment Schemes, and PayFair, failed—notwithstanding cheerleaders in Brussels and Frankfurt.

The European Payments Initiative is the EU’s latest would-be champion. It promotes itself as “Built for Europe, by European players”—the implication being that that is somehow better than a digital Mastercard or PayPal payment subject to EU and national law. The EPI acquired the Netherlands’ leading e-commerce payment system, iDEAL. Its pan-EU challenger digital-wallet and peer-to-peer payment system, Wero, promoted as “Made in Europe,” is live in France, Belgium, and Germany.

In the United Kingdom, more than 95% of payments on U.K.-issued cards run over Mastercard and Visa rails. Regulators have worried about market concentration, but until now that worry has not been that the market leaders were American. And Mastercard runs the U.K.’s faster interbank payment system.

Trump vitriolically declared the U.S. doesn’t need Canadian autos, lumber, and energy. Free to make their own choices and absent punitive tariffs, American consumers and businesses disagree. Canada’s credit networks are American Express, Mastercard, and Visa. Viewed through an autarkic lens, that’s a problem.

‘Full-Throated Enemies’

American payment companies have long acquired foreign payment networks and processors to expand and deepen their delivery footprints. Now, regulators increasingly will be on the lookout against greater reliance on U.S. payment systems.  Acquisitions abroad will face more critical scrutiny.

In the current climate, regulators wouldn’t greenlight Visa acquiring Canada’s largest debit network, Interac, France’s largest card network, Cartes Bancaires, Australia’s national debit network eftpos, or Brazil’s Pix—should such proposals emerge.

An open world with global and national payment systems freely competing is a better world than a patchwork with most countries relying on their own protected private and public payment systems. It is in America’s interest—and in that of its payment industry—that America’s payment systems not be perceived as instruments of foreign and trade policy, except against a handful of full-throated enemies.

—Eric Grover