Credit card companies Visa and MasterCard have joined a growing list of financial institutions suspending services in Russia as the invasion of Ukraine continues amid unprecedented economic sanctions.
What happened: On Saturday, the pair of prime players in global payments systems announced they would implement their own version of economic sanctions by limiting the use of Russian-issued cards outside the country and making foreign-issued cards useless within Russia’s borders.
- The credit competitors made announcements within 16 minutes of each other following a private call between Ukrainian President Volodymyr Zelensky and U.S. lawmakers.
- “We are compelled to act following Russia’s unprovoked invasion of Ukraine and the unacceptable events that we have witnessed,” said Visa CEO Al Kelly.
- PayPal Inc. also halted operations over the weekend due to “violent military aggression in Ukraine.”
This show of solidarity with Ukraine will come at a price as both companies report that business dealings with Russia and its retailers make up about 4% of net revenues.
It contrasts with crypto companies refusing to impose restrictions on Russian clients. Jesse Powell, CEO of Kraken, said his company would only block Russian users if “legally required.”
Jason Powell, CEO of Coinbase, has a similar sentiment, although the company did announce it had suspended 25,000 accounts suspected of engaging in “illicit” activity.
Why it matters: Western-imposed economic sanctions have already caused significant disruption to Russia’s economy. A large chunk of the country’s $650 billion central bank reserves are frozen, and the ruble’s price continues a steep and steady downslope.
- In 2015, the country began to develop independent financial tools, including SWIFT alternative SPFS, after seeing how the West responded to the annexation of Crimea.
- Russia’s largest lender, Sberbank Rossii PAO, said holders of Russian-issued cards
have nothing to worry about as the transactions will be processed on the domestic National Payment Card System.
But Russia may have already found an alternative to American credit card companies as it considers turning to China’s UnionPay system that could work in conjunction with MIR, the country’s home-grown payment network.