Domestic transactions by Russian consumers won’t be affected by the decision of Mastercard and Visa to pull out of Russia. According to reports, ordinary Russians will still be able to use their existing Visa and Mastercard cards to make their regular purchases, transfer and access their savings till the expiry of the cards. Russian government-controlled payments authority Mir made the announcement and holds the leading position of the domestic payments sector. In Russia, Visa and Mastercard are primarily used for international transactions.
Like many other firms in the US and the wider world, both Visa and Mastercard had said that they would also stop their business in Russia. This follows multiple sanctions slapped against Moscow over its unprompted aggression against neighbour Ukraine. The ban will also be applicable to cards issued by local subsidiaries of foreign banks.
Following the decision by these two major companies, American Express and Paypal too have decided to suspend their operations in Russia.
This decision will not only impact cross-border transactions but also have an impact on Russians who are stranded outside their country. All EU nations have closed their airspace for Russian flights. In a retaliatory measure, Russia too has stopped incoming flights from many nations. There are many Russian nationals who are stuck in far-off places like the Caribbean islands and Cuba among others. Closer to home, travellers in Bulgaria have to make their way to Russia via Turkey or Serbia.
As part of the wide economic sanctions, major Russian banks were also de-platformed from the SWIFT– Worldwide Interbank Financial Telecommunications (SWIFT) system. This meant that they would have major hurdles in completing transactions with other financial institutions across the globe.
As a counter to the SWIFT, Russia has developed an alternative SPFS which is being used again mostly for domestic transactions. There is also speculation that the SPFS will be integrated with China’s Cross-Border Inter-Bank Payments System.
Similarly, to counter this ban by Visa and Mastercard, Russian banks are considering cards issued by China’s UnionPay. Already major banks like Sberbank and Alfa-Bank have started working towards implementing this change, according to reports. Other banks that are considering introducing UnionPay credit cards are Rosbank, Tinkoff Bank, and the Credit Bank of Moscow (MKB).
Currently, UnionPay is accepted in more than 180 countries. There are proposals by some banks to issue cards with joint UnionPay and Mir payment systems.