Visa could lose up to $70 million in 2015 while relocating its transaction processing to Russia, news agency Interfax reported last week.
“We expect to lose a part of revenues of approximately $50 million by the end of the fiscal year [Sept. 30],” Visa’s CEO, Charles Scharf, was quoted by Interfax as saying in a telephone conference. That number will likely increase to $70 million over the full year, Scharf said.
Morgan Stanley has estimated Visa’s annual revenues in Russia at $350-$470 million, or up to 4% of its global revenue, The Moscow Times reported.
Following a law passed this past spring and subsequent negotiations, Visa and MasterCard were given the choice between processing transactions in partnership with a domestic player – via the national payment system under completion – or paying to the Central Bank a security deposit of several billion US dollars.
In late October President Vladimir Putin signed a law giving Visa and MasterCard a five-month reprieve on the deadline, which was intially set on Oct. 31.
Correspondingly, the national payment system could be built in the first quarter of next year, Central Bank deputy head Olga Skorobogatova said, as reported by The Moscow Times.
From sanctions to national payment independence
The issue of a national payment system came to the forefront after the United States imposed sanctions on Bank Rossiya in March, causing Visa and MasterCard to refuse to service its bank card transactions as well as those of its subsidiary Sobinbank.
In response, Russian President Vladimir Putin ordered the creation of a national payment system. He gave the example of Asian countries, especially China and Japan, whose systems were able to compete with Visa and MasterCard both domestically and regionally.
According to Central Bank data, 217 million cards have been issued in Russia. Furthermore, 95% of them are associated with international payment systems like Visa and MasterCard and 90% of the settlements made using the cards are within Russia.