Against the backdrop of global political tensions and tit-for-tat diplomatic and economic sanctions involving Russia and the United Nations, Russia is publicly rethinking how it wants to handle payments. Partly, this is so that Russia can try and isolate and protect itself from external economic pressures.
For payments players that need to function within Russia, though, the change may be akin to moving from Moscow in the summer to Siberia in the dead of winter.
“Visa and MasterCard could soon be forced to process all their Russian transactions through the ‘national payment system,’ an unfinished state project that has gained political traction this year amid clashes with the West over the crisis in Ukraine,” according to a report Tuesday (Oct. 7) in the Moscow Times, which itself attributed some details to a different Russian news organization. “A draft bill submitted to the lower house of parliament last week would require all international payment systems and banks that issue payment cards to process transactions via the new system, effectively centralizing all payment processing in one state-run company, business newspaper Vedomosti reported Tuesday.”
Today,Visa and MasterCard combined handle about 90 percent of Russian payment card transactions.
The initial version of the law—signed by President Vladimir Putin in May—required the card brands to submit a security deposit to the Central Bank equivalent to two days of Russian transactions. That amount “Morgan Stanley analysts at the time estimated at $2.9 billion, or five times the systems’ annual revenues in Russia, a cost so high it could have forced the two companies out of the country altogether,” the Moscow Times story said.
The government gave the card brands until Oct. 31 to find an alternative acceptable to the Kremlin, but it looks like such an alternative won’t be ready by the Halloween deadline.
A new bill in Russia is giving Visa and MasterCard “an extension until March 31 to submit the security deposit, although market participants worry that this is still not enough time for the national payment system to reach agreements with both the payment systems and the hundreds of banks operating in Russia.”