REVIEW: Russian Banks Stick with Visa and MasterCard While Seeking Alternatives

© Fotolia / ldprodREVIEW: Russian Banks Stick with Visa and MasterCard While Seeking Alternatives
REVIEW: Russian Banks Stick with Visa and MasterCard While Seeking Alternatives - Sputnik International
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Russian banks are reluctant to immediately divorce themselves from the Visa and MasterCard payment systems, but many are already looking into domestic and Asian alternatives.

MOSCOW, April 9 (RIA Novosti), Nikita Alentyev – Russian banks are reluctant to immediately divorce themselves from the Visa and MasterCard payment systems, but many are already looking into domestic and Asian alternatives.

Russian banks welcomed plans to establish a national card payment processing system, following the recent Ukraine-related sanctions that saw several Russian banks denied services by Visa and MasterCard. The move alarmed the general public and raised concerns about the security of the country’s financial system.

The current legal definition of a national payment system as a countrywide aggregate of payment agents and operations is too broad. A draft law offering a closed-loop for payment infrastructure and information has been submitted to the Russian parliament in light of the card service disruptions initiated by the West.

The Russian Central Bank has invited the country’s banks and payment platforms to co-found a non-commercial organization as the hub operator of the new system. The deputy head of the national payment system (NPS) department backed the non-commercial model, which he presented to Russia's upper house of parliament, the Federation Council, at a meeting with the sovereign regulator.

The alternative scenario, supported by the country's most widespread retail bank Sberbank, is a commercial system. Sberbank’s Vice President Alexei Popov argues that in line with the commercial nature of the banking system, the payment operator should be a business as well. Popov suggested the UEC company, which he heads, as the possible processing hub. According to Popov, the advantages would be cost-driven, as neither the Central Bank nor the federal budget would have to channel funds into a system operated by UEC. Although he did underline that either option would require firm government support.

While the national payment system ideas remain at a draft stage, most financial players have expressed intentions to deepen cooperation with Asian partners, as China and Japan already run such payment systems of their own. UnionPay and JCB are already cooperating with Russia’s largest commercial bank Alfa, with further plans of card emissions.

Bankers in Russia agree the ambitious national project will be a long-term economic endeavor.

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