Visa And MasterCard Can No Longer Block Russian Clients
A new law that went into effect in Russia on July 1st no longer allows Visa or MasterCard to block Russian clients from using their credit cards. This ruling is the result of a new national payment system that ensures electronic payments and prevents blocks on Russian accounts. The new national payment system is projected to be fully operational within 18 months.
When the crisis in Crimea took place, Visa and MasterCard blocked all of their accounts associated with banks that had been sanctioned by the United States. This caused the Kremlin to tighten its laws against foreign credit system operators, forcing foreign credit card companies to pay a security fee to maintain their operations in Russia. These laws were signed on May 5, and they included a provision requiring foreign credit operators to pay 25% of their average daily turnover to the Central Bank.
Morgan Stanley has estimated that this fee will cost Visa $1.9 billion and MasterCard $1 billion. There are no details yet about the final amount for the security fee, but banks are allowed to bypass it if they manage to find Russian partners before October 31. These partners must process their payments for them. Companies like Golden Crown and Universal Electronic Card have been named as possible partners.
Visa is reportedly working to continue its operations in Russia by creating its own processing center in the country. The company plans to have this completed within the next two years.