In a sensible and strategic move, the Russian government has taken action to prevent the 2 largest card firms in the world, MasterCard and Visa, from leaving the Russian market.
Due to the crisis in the Ukraine, MasterCard and Visa were forced by US officials to freeze operations in Russia as part of sanctions brought upon the region by the US government. Shortly after, operations were resumed partially by the card firms. However, due to the possibility of having such a freeze out occur again, President Vladimir Putin took action against non-local payment institutions, by instilling new regulations and working towards establishing a new national payment scheme.
Abiding by the new regulations, MasterCard recently began looking for a local Russian payment solution to process its card payments. Another regulation, to which none of the card companies have yet to abide by, is the deposit of collateral with Russia’s central bank worth two days of their average processing volume in the region, in eight quarterly installments.
Both MasterCard and Visa showed intent on leaving Russia due to the harsh requirements. Even with its own national payment solution, the absence of MasterCard and Visa would create a large financial hole in Russia. In order to prevent the card companies from abandoning the Russian market, government officials reached out, informing them the laws and regulations would be softened.
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This last Wednesday, June 18th 2014, after discussing amendments to ease regulation compliance, First Deputy Prime Minister Igor Shuvalov stated the required deposit will be “significantly reduced”.
“We expect that the actions we are taking will calm the situation with Visa and MasterCard. We will do everything to make sure they keep their activities here,” Shuvalov added.
According to analysts from Morgan Stanley, the current regulation would require Visa and MasterCard to deposit estimated amounts of $1.9 billion and $1 billion respectively. All together Russia is responsible for less than 4% of both firms global revenue.