Russia Gets Ready for Life Without Visa and MasterCard

Note from Blog: We find this article very interesting. First, it assumes that if Visa or MC no longer exist in Russia then Russians would find it difficult to travel abroad. There ARE other ways to get money out of Russian to use in other countries! Second, the article states that Russians are "not big credit card users". Perhaps the rest of the "developed" world can learn from the Rusians about getting into debt. The NWO does not like non credit users.

By Carol Matlack and Elizabeth Dexheimer March 24, 2014

Is Russia ready to cut up its plastic? After Visa and MasterCard stopped processing some Russian transactions in response to U.S. sanctions, Moscow says it could launch a homegrown payment system that could be ready in as little as six months,according to German Gref, chief of the country’s largest bank, Sberbank(SBER:RM).

Hard as it may be for Americans to imagine life without Visa (V) and MasterCard(MA), jettisoning them wouldn’t be all that difficult. Moscow has been preparing for the past few years to issue an electronic payment card that citizens could use for transactions with the government, such as tax and pension payments. Expanding that to include private purchases wouldn’t be hard, says Avivah Litan, an analyst atGartner Research (IT): “If the banks are all on board, they can use the existing [card-reading] equipment in the retail stores. They’ve been thinking about it for so long, it’s just a matter of flipping the switch.”

Legislation has already been introduced in Russia’s parliament that would ban the use of payment systems based outside of the country. “The fact that our banks use infrastructure that they cannot control carries a real threat for national security,” lawmaker Vladislav Reznik said in introducing the measure on March 21.

Such rhetoric is a particular slap in the face to Visa, which was one of the top corporate sponsors of the Sochi Winter Olympics and recently spent $40 million on upgrades to card-payment infrastructure in Sochi’s Krasnodar region and other parts of the country.

Getting rid of Visa and MasterCard would cause two very big problems for Russia, though. A government-issued payment card wouldn’t be accepted outside the country, so that Russians going abroad would either have to pay in cash while they travel or—more likely—try to get a card from a foreign financial institution. And Russia could essentially forget about attracting foreign visitors if merchants there could accept only Russian-issued plastic.

Despite the anti-U.S. rhetoric, “No one wants this to explode into shutting down all the [foreign] cards in Russia,” says David Robertson, publisher of the Nilson Report, a U.S. card-industry newsletter. “Politicians are largely ignorant about how the system works.”

So far the sanctions seem have had limited effect on Visa and MasterCard’s Russia operations. “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.

The U.S. has alleged that the affected banks have connections with individuals targeted by sanctions in retaliation for Russia’s incursion into Crimea. The banks claim their Visa and MasterCard cardholders couldn’t use their cards to make purchases, although they can use their cards to make cash withdrawals from their accounts—and it appears many did. SMP Bank says that since March 21, retail customers have withdrawn some 4 billion rubles ($110 million). The block on SMP cards was lifted over the weekend, as Visa representatives confirmed in a statement Monday: “Based on clarifications provided to Visa by the U.S. government on March 23, Visa has determined that we are not required to block SMP Bank’s and its associates’ access to our network.”

Russians aren’t big credit card users. According to Euromonitor International, about 30 million credit cards are in circulation in the country, which has a population of 143 million. Compare that with the U.S., where the average consumer has more than three open credit accounts, according to credit monitoring groupExperian (EXPN:LN). Debit cards are widely used in Russia, though, with some 192 million in circulation, according to Euromonitor.