Skip to content
Spoiled by war – Conflict hits Eurasian payments market

Spoiled by war – Conflict hits Eurasian payments market

Payments Cards & Mobile’s exclusive research into payments markets in 10 Eurasian countries reveals seismic change in the Eurasian payments market caused by the war in Ukraine.

As our research makes clear, some markets are wearing the chaos better than others – and the dynamics of the entire region are changing for good.

We are living through Europe’s biggest conflict in eighty years. The worst impacts are human, from barrages of senseless violence and loss of life through to the economic devastation that has seen Ukraine’s GDP collapse by half last year.

However, the minutiae of economic data can often discern truth where lies proliferate: and new data from Payments Cards & Mobile’s Digital and Card Payment Yearbooks provide proof of how war is affecting Eurasia’s economies as Russians flee to neighbouring states to avoid war and conscription.

How Russia prepared for war

As has been widely reported, international sanctions against Russia, Russian-owned banks and other payment entities have seen many Western firms exit Russia or dispose of Russian subsidiaries.

International payment services such as Visa, Mastercard and PayPal have either suspended operations in Russia or pulled out altogether.

“Our data shows how war is affecting the region’s economies – and Russia in particular.”

A year ago, we argued (Payments Cards & Mobile March-April 2022) that sanctions would have some effect on Russian payments – but not a devastating impact.

Since 2015, Russia has been weaning itself off Western payments with the launch of MIR as a national payments system. While Visa and Mastercard still have significant market share in the domestic debit and cross-border credit card markets, just under half of all POS payments in Russia still use cash, while MIR accounts for around a third of all electronic payments.

The implication is that sanctions only affected the one-third of domestic payments using international payments brands – and this year’s data shows consumers switching to MIR, Zolotaya Korona, and other domestic alternatives as replacements for Visa and Mastercard.

“Sanctions have had some effect on Russian payments – but not devastating.”

MIR is also mandated for use in all welfare, pension and state salary payments in the country.

Although Visa and Mastercard are widely used for cross-border credit payments, fewer than 1.3 percent of all Russian offline payments are cross-border and credit cards constitute just 11 percent of all cards in Russia (though Visa and Mastercard had a 70 percent share of that market before the war).

Most recent reports speculate that Russian banks are migrating their card portfolios to China UnionPay – an example of where Western sanctions benefit China’s status both in Russia and further afield.

Although use of MIR cards has increased domestically, the system is looking increasingly isolated internationally.

Whereas some 11 countries accepted MIR payments before the invasion, now Turkey, Vietnam, Kazakhstan and Kyrgyzstan have pulled out of acceptance agreements.

The latter two countries are significant misses, being former republics of the USSR and members of Russia’s Eurasian Economic Union (EEU).

Needless to say, Ukraine has cut all economic links with Russia and nationalised all Russian banking assets in their country.

By itself, this is a major development with long-term implications, since Ukrainian banking assets account for 40 percent of the region’s total excluding Russia.

The economic picture

Our data shows that of all of the region’s economies, only Russia is predicted to be in ongoing recession this year.

While the impact of conflict has been calamitous both for Russia and Ukraine, readers should also note consistent strong growth in Georgia, Uzbekistan and Kyrgyzstan.

As we’ll see, these countries have seen large inflows of Russians fleeing conscription – and our payments data reflects these shifts.

The shift in payment flows in favour of Russia’s neighbours is most evident in remittances.

Russia’s government, central bank, regulators and financial institutions have striven to keep banking and payment operations running as normal – but the impact of Russians fleeing to adjacent markets is immediately obvious in last year’s data.

Last year, Uzbekistan, Georgia, Azerbaijan, Armenia and Kazakhstan all saw net remittance inflows between three and five times larger than the long-term average as Russians moved money in support of relatives fleeing conscription.

In the case of Kazakhstan, a long-term remittance outflow trend turned into a net inflow as Russians moved their money to the “near abroad.”

These findings corroborate reports that between 300,000 and 700,000 Russians have fled the country since the start of the war.

“Several Eurasian markets saw massive net cash inflows as Russians fled war.”

The number of card payments in Azerbaijan last year grew at almost double their long-term average, while card payments in Kazakhstan more than doubled (117.9 percent), and growth in Kyrgyzstan was 20 percent above its long-term average, at 78.3 percent.

Russia was one of only two countries to record lower growth in card payments than its long-term average, at 29.9 percent.

When ATM withdrawals are included, card usage more than doubled in Kazakhstan and Azerbaijan and grew by almost 40 percent in Georgia.

Such changes are at least in part due to population inflows from Russia, where card use per capita is much closer to Western European averages.

The value of expenditure on payment cards confirms this picture.

Russian card spending grew 8 percent below its long-term average measured in US dollars, while expenditure in Azerbaijan grew three times faster than average, and twice as fast in Kyrgyzstan.

Expenditure doubled in Kazakhstan – twenty percent above the long-term growth rate.

Catching the West

Away from the war, the long-term picture of a region catching up with its Western counterparts continues.

In terms of cards per head of population, Eurasia is now just behind Europe’s 33 markets, at 1.83 cards per capita compared to Europe’s 1.98.

Despite a distinctly anaemic performance by Russia, card numbers still grew at 30 percent more than their long-term average across the region – 10.9 percent versus 7.5 percent.

As in Western Europe, ATM use continues to decline in Eurasia, and more POS transactions are in evidence as cash use declines – though cash is, as a rule, still far more widely used in these countries than in the West.

As a percentage of all transactions, ATM withdrawals accounted for 4.7 percent of all transactions last year, down from 6.3 percent the previous year and in line with the long-term average.

Russia dominates less

While Russia still accounts for four in five dollars spent on cards across the region, its long-term decline as the centre of the region’s economy accelerated last year.

Five years ago, Russia accounted for almost 92 percent of all card spending: last year, that figure was just above eighty percent – but the rate of decline in Russia relative to the rest of the region more than doubled.

Further evidence of Russian decline comes from the number of electronic payment (POS) terminals installed.

Measured either in absolute terms or per one million of population, the number of places Russians could use cards declined by 1.4 percent last year, compared to long-term growth of 15.7 percent per year over the last five years.

“Russia’s decline relative to the rest of the region doubled last year.”

Given Russia’s dominance in the region, that country’s decline contributed to lower overall growth in card acceptance – 6.1 percent – compared to the long-term average of more than 15 percent.

However, individual markets such as Kazakhstan (three times faster than long term growth), Armenia (double long term growth) and Moldova all saw major increases in their acceptance networks.

Measured against European Union averages, the penetration of card terminals slipped slightly last year across the region owing to Russia’s poor performance, but continues to show long-term growth that outstrips the EU and should, eventually, lead to convergence.

Electronic payments: a bellweather?

In any walk of life, it’s tempting to overstate the importance of one’s area of competence – and payments is no exception.

That said, there’s no doubt that data on how and where people pay for goods and services paints a picture of any economy’s state – and reveals more besides.

On the evidence of this year’s data, predictions of Russia’s long-term decline as a result of the war appear to be understated, with the country’s traditional dominance declining at a faster rate than seen previously.

Meanwhile, new economic powers in the shape of Kazakhstan and, to a lesser extent, Georgia are emerging.

While sanctions may not have had the short-term impact some envisaged, recent sanctions on Western capital and technology, not to mention Ukraine’s divorce from Russia’s economic orbit, should see the region change massively in the years ahead – and our data this year shows the roots of that change taking hold.

The great replacement: how Russians pay now

Immediately after Russia’s invasion of Ukraine last February, Apple Pay announced it was pulling out of Russia.

A survey of 1,600 Russians conducted in the wake of that decision revealed that 96 percent of Apple Pay users in Russia said they would switch to payment cards to replace Apple Pay, with the balance switching to cash.

However, switching to cards would prove no easy task, as Visa, Mastercard, American Express and PayPal all announced they were joining the exodus in March 2022. Since that time, usage of domestic MIR cards has, predictably, spiked by some 70 percent.

“As well as international payment systems, leading marketplaces such as Amazon and AirBnB have also left Russia.”

Russian consumers are further inconvenienced by the exit of marketplaces like Amazon, AirBnB and the Epic Games platform (makers of Fortnite) from the country.

While it’s true that domestic online behemoth yandex offers an alternative for search, marketplace and payments through its digital wallet, consumers will nonetheless find their options limited.

Furthermore, some domestic wallet providers such as QIWI and webmoney may find international connectivity to adjacent markets like Kazakhstan a challenge in the future.

As our data this year shows, consumers are taking advantage of such connectivity as still exists to exit their funds from Russia by any possible means – while they still can.

For more information about payments and banking in Eurasia, please visit:


The post Spoiled by war – Conflict hits Eurasian payments market appeared first on Payments Cards & Mobile.

Cart 0

Your cart is currently empty.

Start Shopping