Mastercard and Visa block in Russia does not stop domestic purchases | Banking

Consumers will still be able to use Mastercard and Visa-branded cards for domestic transactions in Russia, the country’s state-backed payments network has said, reducing the impact of the US firms’ decision to pull services over the invasion of Ukraine.

Russia’s homegrown payments system Mir said the cardholders would still be able to access their funds, make withdrawals and domestic transfers – at least until their bank cards expire.

Mir has processed most domestic payments in Russia since 2015, while foreign operators such as Visa and Mastercard continued to run international transactions. The operator – which is 100% owned by the country’s central bank – was established on government orders to protect the economy against sanctions imposed over Moscow’s annexation of Crimea in 2014.

“All cards of these payment systems already issued by Russian banks will continue to work within our country as before,” Mir’s operator said in the early hours of Sunday.

“Until the expiration of their validity, Visa and Mastercard cardholders have access to all the funds on their accounts, as well as all the usual payment transactions – paying for purchases, transferring funds from card to card, withdrawing cash, etc.”

The statement was issued shortly after the US firms declared on Saturday they would be suspending Russian operations in light of Moscow’s continued military assault on Ukraine.

Both Mastercard and Visa’s decision to suspend their Russian operations will primarily impact foreign payments, meaning local consumers will no longer be able to use their Russian cards abroad or for international payments online. Foreign customers will also be blocked from making payments to Russian companies or withdrawing cash within the country.

“Payments abroad, including on foreign internet resources, will not be available with Visa and Mastercard international payment systems cards issued by Russian banks,” Mir confirmed.

The move is expected to accelerate Russian banks’ adoption of Mir’s own cards, which are accepted in a handful of countries including Turkey, Vietnam, Armenia, Belarus, Kazakhstan and Kyrgyzstan.

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On Saturday, Mir said it had already seen a surge in demand for its cards following sanctions being imposed against Russian banks by the US, EU and UK. According to its own statistics, more than half of Russians already owned a Mir card as of September 2021, accounting for 32% of all transactions.

The uptake is likely to play into critics’ fears that economic sanctions will merely incentivize Russia to invest in alternative schemes. Similar concerns have been raised about blocking Russia from Swift – the secure message system used by banks for cross-border payments – and the potential rise of alternatives such as Russia’s equivalent SPFS system.

PayPal stopped accepting new customers in Russia on Wednesday and on Saturday expanded that block, saying its services there – primarily, customers transferring money to each other – had been suspended. It added that it would allow withdrawals “for a period of time, ensuring that account balances are dispersed in line with applicable laws and regulations”.

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