After months of political tension and ensuing diplomatic and economic sanctions, Russia is rethinking the way it handles payments in a shake-up that could force Visa and Mastercard out of the country.
The Moscow Times reported that Visa and Mastercard are unlikely to meet an October deadline necessitating that they find an alternative Russian based payment system to process their transactions.
Earlier in the year, the two payment processing giants halted service to Russian banks that had been sanctioned by the United States in response to Russia’s annexation of Crimea. In May, President Vladimir Putin signed a law ordering the establishment of a Russian national payment system in a bid to curb Russia’s dependence on foreign systems.
The May law also demanded that Visa and Mastercard submit a security deposit to the Russian Central Bank that was worth the value of two days of transactions processed in the country. The estimated sum – $2.9 billion – is five times the systems’ annual revenue in Russia. The cost would likely have forced the two companies out of the country altogether.
The following negotiations ended in the compromised deal allowing Visa and Mastercard to evade the fine if they found a Russian payment system “of national importance” to process their transactions by Oct. 31.
A following draft bill was submitted to the lower house of parliament last week, requiring all international payment systems and banks that issue payment cards to process transactions via the new system, which is currently an unfinished state project. The move would effectively centralise all payment processing to one state-run company.
If accepted, this new bill would give Visa and Mastercard a March 31st extension to submit the security deposit.
This crackdown is worrying for market participants both globally and domestically. Market participants worry that the national payments system will not be able to reach agreements with both the payment systems and the hundreds of banks operating in Russia by March.
Meanwhile, domestic payment system companies worry that the state-sponsored company could sweep all competition off the market, the paper reported.
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