Visa and Mastercard suspend operations in Russia

Suspension of all services by Visa and Mastercard.

March 7, 2022
Visa and Mastercard suspend operations in Russia
Ian Lewis

Written By

Ian Lewis

 
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In a further blow for the Russian economy following the country’s invasion of Ukraine, Visa and Mastercard have announced they are suspending their operations in Russia.

Russian residents who have a bank card issued within Russia won’t be affected for domestic payments, but the news does mean that credit and debit cards issued by Russian banks won’t work outside the country, and any cards issued abroad won’t be accepted at Russian cash machines or businesses.

With Visa and Mastercard combined accounting for 90% of all debit and credit card payments outside of China, this is another significant measure taken against Russia as Ukraine pushes for more countries and organisations to sanction the country in a bid to end the war.

Financial measures hitting hard

The suspension of all services by Visa and Mastercard comes a few days after the organisations already blocked a number of financial institutions from using their networks, following the instructions of government sanctions.

Many of these institutions have also been blocked from SWIFT, the interbank messaging system which plays an important part in money transfers between bank accounts internationally.

PayPal has also shut down all of its services in Russia, further limiting the options available to Russian businesses (and individuals) when they want to make payments or transfer funds.

One option that remains open to Russians are cryptocurrency exchanges, which so far have refused to block services in the country despite pressure and condemnation.

Coinbase and Binance, two of the largest crypto exchanges in the world, have both made arguments that any outright ban would harm innocent consumers in Russia, many of whom “likely oppose what their country is doing”.

Both Visa and Mastercard have expressed regret at any impact on cardholders, but both have stated that the move was necessary to move closer to a peaceful resolution.

Global banks facing uncertain future

While many payment processing apps are able to quickly introduce sanctions on Russia as a result of the invasion of Ukraine, global banks are expected to find any potential move to withdraw much more difficult, which could complicate their decision if the war continues.

No banks have yet announced any plans to withdraw from the country but there will be growing pressure on banks’ reputations if they do continue to operate. Sources have suggested that at least one major global bank has set up a team to work with consultants and lawyers to look into the logistics of withdrawing.

However banks would normally need consent of the central Russian bank and regulators before they began the withdrawal process, and they would need a willing buyer who could take on their loan book and any other financial commitments. There is also the risk that banks could be sued by Russian clients.

One option that seems more likely is a reduction of services with only a skeleton crew remaining. While this may not have the same reputation-saving impact on the international stage, it would mean that should banks wish to upscale their operations in Russia again in the future they wouldn’t need to re-apply for a banking license.

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