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article imageRussia ready to develop own credit card system

By Ken Hanly     Mar 28, 2014 in Politics
Moscow - In response to new U.S. sanctions that impact a few Russian banks, Russia is preparing to develop and launch its own credit card system.
German Gref, head of Russia's largest bank, Sberbank, said that the system could be launched in as little as six months time. For the past few years, Russia has been preparing an electronic payment card that Russians could use for transactions with the government such as tax and pension payments. This system could be expanded to include private purchases without too many difficulties according to Avivah Litan of Gartner Research.
As a result of the recent sanctions by the U.S. a few Russian banks including Bank Rossiya were blacklisted and customers were unable to use Visa and MasterCards. Putin is aggressively trying to lessen its dependence on the U.S. dollar and western payment settlement institutions. It has already done this in recent large trade deals with China which were carried out using national currencies. Putin noted that national payment systems were already in use in Japan and China."In countries such as Japan and China these systems work, and work very well,Initially, they started out solely as national systems limited to their own markets, their own territory, their own population but they are becoming more popular right now."
As far as the overall business of Visa and Master Card in Russia is concerned the sanctions have had little effect: “MasterCard is open for business as usual with all our Russian banks,” with the exception of Bank Rossiya, Sobinbank, and SMP Bank, where service was suspended in compliance with the U.S. sanctions, MasterCard spokesman Seth Eisen said in an e-mailed statement on March 21. Visa suspended services at those three banks as well as a fourth, Investcapitalbank. The four institutions “represent less than 1 percent of Visa’s business in Russia,” the company said in a statement.
Even so the move by the west has made it clear that Russia as part of capitalist globalization has become dependent upon SWIFT the Society for Worldwide Interbank Financial Telecommunication" the umbrella framework for all interbank transactions in a petrodollar world. Moves to use SWIFT as a political tool to punish countries will inevitably lead to moves by countries who might be targets to move out of the system and create their own. Companies such as Visa and Master Card should be worried about the effect such sanctions might have on their own businesses in the longer term.
Visa just finished spending 40 million to upgrade their system in the Sochi region. Now it is faced with a bill already introduced in the Russian parliament by lawmaker Vladislav Reznik that would ban the use of payment systems that are based outside of Russia; “The fact that our banks use infrastructure that they cannot control carries a real threat for national security,”
The ban bill probably will not pass or go into effect if it does since complete banning of outside payment cards would be devastating for the tourist industry and as well for Russians traveling outside the country who would need to get a separate card from a foreign institution. What seems more likely is the development of a parallel competing system as well as continuing measures to avoid the use of U.S. dollars in foreign trade.
More about Mastercard in Russia, Visa in Russia, sanctions against Russia
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