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Global Cards Networks Chipped Away by Russia


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According to a report published by Russian business daily, Kommersant, the country's central bank is looking to assign processing of domestic Visa and MasterCard transactions to its own subsidiary: NPCS (National Payment Card System). "These developments clearly show the importance of the domestic card networks for the political agenda of certain countries", commented Robert Grealis, CEO of Lafferty Group. "This move takes a vital component of payments processing under state control."

As the situation in Ukraine has escalated, US sanctions have forced Visa and MasterCard to cease processing some Russian transactions and it is widely expected that Russia could roll out its own domestic card scheme soon.

The two leading global networks are under increasing global pressure from governments, most notably the EU, seeking a share of the lucrative card processing business. Russia represents around $167 million in revenue for MasterCard, around two percent of the company's global annual revenues of $8.3 billion. Visa too had hoped to develop its Russian presence, having been top sponsor of the Sochi Winter Olympics in February, an investment that has been effectively scotched by the larger political conflicts. "One winner in all this may be China UnionPay," added Phathisani Khumalo, deputy head of research at Lafferty. "UnionPay is planning to co-brand with the operator of the recently-announced Russian national payment system. In August of last year, MDM Bank partnered with the Chinese payment network to issue UnionPay-branded cards. Top Russian banks including Alfa Bank, Gazprombank and Bank of Moscow are reportedly preparing to start implementing and issuing UnionPay card capability."

UnionPay, which was launched in 2002 by the People's Bank of China, is now the second-largest payment network by value of payments processed, behind Visa. Lafferty Group estimates that by 2016, UnionPay could be the leading payment network by value in Russia.

UPDATE, 17 September 2014: A Visa spokesperson commented to Lafferty: "Since the passing of Russian national payment system amendments into law, Visa has been working with Russian authorities and financial institutions to explore how we can continue serving and developing the payments marketplace, while not compromising on the highest standards our clients expect. Russia is an important market to Visa and we continue to explore local processing options with our partners. We do not have anything further to add at this stage as there are still details to finalize."

Notes for editors
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