Visa and MasterCard have won a reprieve from Russia’s demand that the card brands pay more than $1 billion each to continue operating in the country, Russia Beyond the Headlines reported.
On Thursday (Oct. 23), Russian President Vladimir Putin signed a law to delay an Oct. 31 deadline for security deposit payments by Visa, MasterCard and other international card systems. Those security deposits amounted to approximately $200 to 300 million per quarter, or as much as $1.2 billion per year, Russian Central Bank Deputy Chairwoman Tatiana Chugunova said.
The deposits, representing a percentage of the payments processed by each card brand, would be required if the card networks had not moved their processing operations to Russia’s new payments-processing network by the end of October. The problem: The network, which is based on the card-processing networks of Japan’s JCB and China UnionPay, isn’t ready to handle the volume of payments from Visa and MasterCard, which together make up 80 percent of all banking cards in Russia.
The new law will extend the deadline for calculating and paying the security deposits to the first and second quarters of 2015, said Nikolay Zhuravlyov, deputy chairman of the Budget and Financial Market Committee of the upper house of Russia’s legislature. Zhuravlyov acknowledged that extra time was needed for the transition to the new national payment card system.
The shift to the new system was sparked when Visa and MasterCard accepting payments for some Russian banks hit by U.S. sanctions. Visa, MasterCard and American Express have agreed to operate in Russia through the national payment card processing center.