With international payment giants suspending their services, banks in Russia may turn to China’s UnionPay system.
Over the weekend, Visa, Mastercard, American Express and PayPal all announced plans to pull services in Russia over the country’s invasion of Ukraine.
Visa said on Saturday (5 March) that it was working to “cease all Visa transactions”, specifying that Visa cards issued in Russia will no longer work outside the country and Visa cards issued outside of Russia will no longer work within the country.
The company’s chief executive, Al Kelly, said it was “compelled to act following Russia’s unprovoked invasion of Ukraine and the unacceptable events that we have witnessed”.
Mastercard made a similar announcement that day, saying that cards issued by Russian banks will no longer be supported by the Mastercard network and cards issued outside the country will no longer work at Russian merchants or ATMs.
On a call with Ukrainian president Volodymyr Zelenskyy on Saturday, US president Joe Biden welcomed the decision by Visa and Mastercard, according to the White House.
American Express went on to announce a similar shutdown on Sunday, adding that it is also suspending business operations in Belarus.
Meanwhile, PayPal joined the growing number of financial and tech companies taking action on Saturday, saying it was shutting down services in Russia due to “the current circumstances”.
The payments company stopped accepting new customers in Russia last week, and will now continue to process customer withdrawals “for a period of time” to ensure that account balances are “dispersed in line with applicable laws and regulations”.
We received a letter from @Dan_Schulman, CEO PayPal. So now it’s official: PayPal shuts down its services in Russia citing Ukraine aggression. Thank you @PayPal for your supporting! Hope that soon you will open it in for 🇺🇦 pic.twitter.com/RaJxEMSLQe
— Mykhailo Fedorov (@FedorovMykhailo) March 5, 2022
Money transfer companies Wise and Remitly have also suspended some services in Russia.
While these decisions could cause disruption for Russian consumers, the country’s state-backed payments network clarified that people will still be able to use Mastercard and Visa cards for domestic transactions in Russia.
Mir, which began operating in 2015, said cards issued already will continue to work until they expire, and Russian consumers will be able to access funds, make withdrawals and domestic transfers. The shutdowns will impact foreign transactions, and cards issued by these companies abroad won’t work in Russian shops or ATMs.
But there are concerns that these moves, along with economic sanctions such as blocking Russian banks from international transaction system SWIFT, will simply push the country towards alternatives.
A number of Russian banks have suggested they could issue cards using China’s UnionPay system, along with the Mir payment network.
Susannah Streeter, senior markets analyst at Hargreaves Lansdown, told BBC News that UnionPay is likely to be the alternative “system of choice” for Russian banks as it is already accepted around the world.
“But it will take significant time to reissue millions of cards, and will add to the financial turmoil in the country,” she added.
Big Four becomes two
Elsewhere, professional services giants KPMG and PwC said on Sunday that they will no longer have a member firm in Russia.
KPMG’s firms in Russia and Belarus will leave its network, affecting more than 4,500 partners and staff, while PwC Russia is leaving that company’s network, affecting 3,700 partners and staff in the country.
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