Russia launches payment card to rival Visa and Mastercard

It’s not a space race, but a card race. Russia has issued its first electronic payment card this week to compete against Visa and Mastercard.

Mir

Mir

The launch of the bank card – called Mir, meaning ‘peace’ or ‘world’ in Russian – is seen as a response to Western sanctions that interrupted the processing of some Russian payment transactions in March 2014.

According to The Wall Street Journal, ‘Russia has for years considered creating its own local payment system, but the concept gained little traction until the Kremlin endorsed the idea following the “annexation” of Crimea last year’.

The Crimean peninsula, home to two million people, has faced problems with its banking system since it was annexed/liberated (delete as applicable) from Ukraine.

The US newspaper says only a few banks operate there, and cafes and stores in the resort area haven’t been able to accept international bank cards since Visa and Mastercard services were halted.

The Bank of Russia and the National Payment Card System presented the new card this week, saying that the move will ‘bolster Russia’s financial sovereignty’.

Bank Rossiya, SMP Bank and RNKB Bank – all of which are on the Western sanctions list – will be among the first Russian lenders to issue the plastic cards. Russia’s largest lenders, Sberbank and VTB, also joined the national payment system.

The Russian government has allocated RUB 4.5 billion ($64.2 million) to issue the cards.

The Wall Street Journal says: ‘Last year, the push for a new payments system gained momentum after Russia’s parliament passed a law designed to force Visa and Mastercard to keep hundreds of millions of dollars at the Bank of Russia as a collateral against a possible freeze.

‘This draft law raised concerns that the companies would leave Russia, causing massive disruptions in the crisis-hit economy. But both Visa and Mastercard said they would like to continue operations and, after the law was amended, reached an agreement with Russian authorities to continue to process payments in Russia.’

To ensure Mir’s survival in the competitive world of cards, Russia’s central bank plans to initially promote the cards among state employees in 2016. It will have to work hard to gain further traction, as Russia Today estimates the Russian market to comprise 230 million cards.

The Wall Street Journal adds: ‘Russia will also issue the new cards together with global companies, such as Maestro, so a cardholder will be able to use the card at home and abroad.

‘Despite the growing popularity of noncash payments, Russians still prefer to use cards to withdraw money from ATMs, according to a central bank study. More than 64% of Russians had at least one bank card in 2014.’

By Antony Peyton.

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