Visa and MasterCard will continue to operate in Russia, the companies’ representatives told journalists last week at the St. Petersburg International Economic Forum, following a meeting with Russia’s Deputy Prime Minister Igor Shuvalov and Minister of Finance Anton Siluanov.
Visa and MasterCard executives had expressed concern about the consequences of new rules recently adopted by the Russian parliament – including an obligation to provide Russia’s central bank with a hefty security deposit to be eligible to continue working in Russia.
Compliance with the new law would have cost Visa and MasterCard at least $2.9 billion – some five times more than the two companies’ combined annual revenue in Russia, Morgan Stanley estimated in a confidential report leaked to The Moscow Times earlier this month.
Under these circumstances, the two US companies might be better off abandoning the Russian market, Morgan Stanley analysts wrote.
Top Russian businessmen and officials also conceded that the new rules are excessive.
According to the agreement reached with the Russian authorities, Visa and Mastercard will set-up local operators to serve their Russian customers. These local operators will not transfer payment-related data to processing centers placed under foreign jurisdiction. Their activity will also not be affected by the decisions of foreign governments – such as the recent sanctions that forced Visa and MasterCard to stop serving certain Russian banks.
Moreover, these local operations will be connected to the national payment system, which Russia decided to build on its own by 2016.
In order to give Visa and MasterCard enough time to set up their local subsidiaries, the regulation adopted earlier this month will not come into force on July 1, 2014, as initially planned, but rather in a year and a half.
Russia’s national payment system will be open to other foreign payment operators – in particular, China’s UnionPay and Japan’s JCB.
The details of the agreement have not been disclosed, but the general feeling is that Visa and MasterCard are set to continue working in Russia under conditions that seem acceptable to each party.
According to Central Bank data, 217 million cards have been issued in Russia. A full 95% of them are associated with international payment systems like Visa and MasterCard, and 90% of the transactions made using the cards are within Russia.