Since 2014, the national payment system Mir has been developed in anticipation of future sanctions. To compensate for its poor international coverage, Mir partnered with the Chinese payment system UnionPay.
Ukrainian President Volodomyr Zelensky's call on Saturday to further isolate and boycott the Russian economy has not gone unheeded. The payment systems Visa, Mastercard and American Express announced that they will suspend their operations in Russia.
“We are compelled to act after Russia's unprovoked invasion of Ukraine and the unacceptable events we have witnessed,” said Al Kelly, CEO of Visa Inc, adding: “We regret the impact this will have on our valued colleagues, and the customers, partners, merchants and cardholders we serve in Russia. This war and the ongoing threat to peace and stability demand that we respond in accordance with our values.”
Visa, Mastercard and American Express payment cards issued abroad will therefore cease to work for purchases in Russia, regardless of whether the transaction takes place in person at the merchant or online. The cards can also no longer be used at ATMs in Russia. Russian cardholders will no longer be able to use their cards outside Russia from 10 March.
A measure put into perspective
According to our colleagues in the newspaper Les Echos, the Russian market contributes to almost 4% of the net revenues of Visa and Mastercard, i.e. a turnover of $1bn each. On the other hand, their cards represented 74% of payment transactions in Russia in 2020.
Given the market shares of the US operators, their decision to withdraw from the Russian market could have serious consequences for both Russian consumers and merchants. However, the Russian national payment system, Mir, issued a press release on Sunday saying that “all cards of these payment systems already issued by Russian banks will continue to operate in our country as before.”
For payments outside Russia, Mir says: “Customers will be able to use cash or Mir cards in countries where they have already been accepted--for example, in Turkey, Vietnam, Armenia, Belarus, Kazakhstan, Kyrgyzstan and others.”
A measure anticipated since 2014
Russia had already anticipated a possible deactivation of international payment systems, as early as the imposition of the first sanctions following the annexation of Crimea in 2014. The Mir system was subsequently made compulsory for the transfer of salaries, pensions and benefits of Russian state employees.
On the one hand, 52% of Russian citizens had a Mir card by the end of 2021, according to data published by the Russian payment system. In the same year, Mir had a 25% market share in Russia in terms of transaction values, according to data provider GlobalData. These figures have been steadily increasing since 24 February--the date of the start of the invasion of Ukraine by the Russian armed forces--according to figures published by the Russian payment system on its website.
For example, customers of VTB, one of Russia's largest banks, ordered 15% more Mir cards in the previous week than in the week before. Two other banks, MKB and Gazprombank, increased their issuance of Mir cards by two and five times respectively.
A measure offset by China
Although more than 270 banks are members of the Mir system and issue or accept its cards, only 23 are foreign banking institutions. Mir's partnership with UnionPay was therefore intended to offset its limited international coverage. “To pay for purchases and withdraw money abroad, you can get a Mir-UnionPay co-badged card, which will be accepted both in Russia and in 180 countries that support work with Union Pay," stated Mir in a press release.
As reported on 21 January by Russian news agency TASS, Russian Standard Bank customers can now transfer money to cards of the Chinese payment system UnionPay. At present, UnionPay makes its services available to customers of six Russian banks. This number could grow even further. Indeed, Sberbank--Russia's largest bank--and Tinkoff Bank have announced their intention to join the UnionPay network.
Already well established in Russia, UnionPay has an office in Moscow for its operations covering the Russian market.
UnionPay cards operate in 180 countries. In Europe, the company has a representative office in Paris. Its services are also available in Europe through the CITI Europe bank. UnionPay started its operations in Luxembourg following a trip by former Luxembourg finance minister Pierre Gramegna (DP) to Shanghai in October 2017. At the time, UnionPay was still only accepted in 162 countries.
This story was first published in French on . It has been translated and edited for Delano.