First it was Visa and Mastercard, then American Express and Discover followed suit, noting that Discover and Diners Club International do not have any active partners in Belarus and Russia.
JCB completes exit but Mir stands strong
Now Japan’s JCB has completed its withdrawal, noting, in light of the sanctions in response to Russia’s invasion of Ukraine, we have been implementing the measures in accordance with laws, regulations and contracts.
“In view of the difficulties we are currently witnessing and the unforeseen circumstances in the region, we have now decided to suspend the JCB network operations in the Russian Federation.
With this action, JCB cards issued in Russia will no longer be supported outside the country, and any JCB cards issued outside of Russia will no longer be supported within the Russian Federation.”
NSPK
So how is the pressure of sanction working out inside Russia?
Putin’s larger push to reshape his country’s payments system after western sanctions were imposed on Russian banks following the 2014 invasion of Crimea has been planned well.
Moscow built its domestic payment system from scratch as a bulwark against Visa and Mastercard (in particular) pulling their services again; meanwhile, alternatives were explored to protect the ability to send and receive money abroad.
“For the first time in post-Soviet Russia, the events of that year demonstrated how financial sanctions can impact not only the individuals but the wider economy,” said Anastasia Nesvetailova, head of macroeconomics and political development at a division of the UN’s Conference on Trade and Development.
“The risk . . . suddenly potentially became an everyday reality, not just for oligarchs.”
Now, Russia is reaping the rewards for creating an alternative payments system that has helped mitigate the effect of more severe sanctions put in place after Putin sent tanks over Ukraine’s border.
Russia’s planning has also highlighted the risk for western powers that sanctions reorder the international payments landscape, shifting the financial system away from the US and towards China.
Mastercard and Visa suspended services in Russia at the start of March, where they make up about 70% of the debit card market, going further than sanctions that required networks to stop processing payments from certain Russian banks.
American Express, PayPal, JCB and Western Union have also suspended services in Russia, as well as digital wallets Apple Pay and Google Pay.
However, while international transactions have been limited, ordinary Russians have not felt much change as domestic transactions operate as normal — including for cards bearing the Visa and Mastercard logos.
“The majority of people hit by this either left the country in the past couple of weeks or have been living abroad earlier,” said a Moscow-based employee of a payment company.
That resilience is largely down to the development of the National Card Payment System (NSPK), which recreates the financial plumbing needed to process card transactions in Russia.
NSPK launched in August 2014 and by 2015 it had signed deals with Mastercard and Visa to handle all domestic payments in the country.
Adoption was helped by Moscow threatening hefty fines if the payment networks did not ensure that processing of Russian transactions was done in the country.
Mir
Russia’s domestic card scheme Mir also runs on NSPK’s infrastructure.
Mir was launched in 2015 after three options were considered for the scheme — importing UnionPay, which had operated in parts of Russia since 2008; extending the network of the largest private bank, Sberbank; or creating a new system.
Putin chose the last option amid fears of replacing one external power with another, although the hardware backbone of Mir is supplied by Chinese technology company Huawei in collaboration with a Russian IT firm.
More than 100 million Mir cards are in circulation, about one-third of total market share, thanks to mandates for use by civil servants and pensioners. A digital wallet, Mir Pay, launched in 2019, continues to operate on Android devices.
The name Mir itself means “peace”.
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