Mastercard, Visa suspend operations in Russia over invasion of Ukraine
Payment firms Mastercard and Visa on Saturday said they were suspending operations in Russia over the invasion of Ukraine. The move will prevent their cards issued by Russian banks from working in other countries and block people with cards issued elsewhere from purchasing goods and services from companies in Russia. However, other transactions may still go through, The New York Times reported.
Why does this story matter?
The move is considered to be another blow to Russia's financial system after it invaded Ukraine. Unprecedented Western sanctions imposed on Russia have already frozen much of the country's central bank's $640 billion in assets. Several Russian banks have been barred from global payments system SWIFT. The actions have sent the Russian currency Ruble into free-fall, erasing a third of its value this week.
We don't take this decision lightly: Mastercard
In a statement, Mastercard said it had not made the decision "lightly," and it was taken after discussion with customers, partners, and governments. "As we take this step, we join with so many others in hoping for and committing to a more positive, productive, and peaceful future for us all," the company added. Notably, Mastercard had operated in Russia for over 25 years.
'Compelled to act following Russia's invasion of Ukraine'
Visa said it is working to "cease" all Visa transactions within Russia "in the coming days." "We are compelled to act following Russia's unprovoked invasion of Ukraine, and the unacceptable events that we have witnessed," Al Kelly, Chief Executive Officer of Visa, said. "This war and the ongoing threat to peace and stability demand we respond in line with our values," Kelly added.
Many other companies have also suspended operations in Russia
Apart from Mastercard and Visa, many other companies across the world have also announced similar moves to increase financial pressure on Russia. These include PayPal Holdings Inc, which announced a similar decision earlier on Saturday.
Biden welcomes Mastercard, Visa's move
In a call with Ukraine's President Volodymyr Zelensky, the United States President Joe Biden welcomed Visa and Mastercard's decision to suspend their operations in Russia. "President Biden noted his administration is surging security, humanitarian, and economic assistance to Ukraine and is working closely with Congress to secure additional funding," a White House statement on the call added.
Move would not impact users: Russia's largest lender
Meanwhile, Sberbank Rossii PAO, Russia's largest lender, said the move by Visa and Mastercard would not affect users of the cards it issues in Russia. Sberbank said its customers would be able to withdraw cash, make transfers, and pay both in offline and online stores because transactions in Russia pass through the domestic National Payment Card System, which doesn't depend on foreign payment systems.
Mastercard, Visa had significant business in Russia
Notably, Mastercard and Visa both had significant business in Russia. In 2021, about 4% of Mastercard's net revenues were derived from business conducted within, into, and out of Russia. Visa also derived 4% of its total revenue from Russia in 2021.
Russia's efforts to increase independence of its financial system
Reportedly, Russia has been taking steps to increase the independence of its financial system after its ties with the West deteriorated over the country's annexation of Crimea in 2014. It has set up its own banking messaging system, known as SPFS, as an alternative to SWIFT. Russia's own card payment system MIR also began operating in 2015.
