If you were going have project plan on how to invade a neighboring country, one of the principal factors to consider as a milestone is what to do about your payment systems. Of course, there would be plenty other areas requiring preparation, but the impact to domestic life requires planning.
Read FIS Global’s annual report on payments and you will find that Mastercard and Visa account for 81% of Russian e-commerce and point of sale payments. The Russian domestic payment scheme, Mir, accounts for 12%, and other functions carry 7%.
Impact to Mastercard and Visa
From a financial perspective, Visa on 3/2/22 reported in their 8-K filing with the Securities and Exchange Commission (SEC) that Russian transactions, including domestic and cross-border transactions, account for 4% of the firm’s net revenue. Ukraine accounts for 1%. Mastercard reported the same exposure a day earlier in their 8-K filing with the SEC.
The sanctions will not have a severe impact to the top payment brands.
Impact to Russian Payments
First, you really do need a payment card in Russia, now more than ever. Just the price of coffee will require a truckload of bank notes. Statistica indicates that a pound of coffee in Russia costs USD 7.12, as of 2019. Let us not overcomplicate things and use that as the baseline. According to XE.com, the Russian Ruble, when exchanged for a U.S. Dollar, traded slightly more than the value of a penny, at the rate of $0.014 on March 3, 2021. A year later, today, the Russian Ruble trades for $0.0093, and the worst is yet to come. (By the way, if you like coffee analogies, see our latest blog on BNPL.)
Back to the Ruble….Trading economics reported:
The Russian ruble pared steep losses to regroup at 105 per USD, as Russia and Ukraine commenced talks in Belarus. The rebound came after the ruble fell to fresh lows of 118 on Thursday, as Russia’s invasion of Ukraine and consequent Western sanctions continue to pressure Russian assets. Rating agencies Fitch and Moody’s downgraded Russian sovereign bonds by six notches to “junk” status, while sell-offs led the LSE to suspend Russian securities from trading. Western allies limited Russian entities’ ability to transact internationally after agreeing to remove key Russian banks from the SWIFT interbank system and freezing the assets of the central bank.
Impact to Mir
Mir will need to pedal fast. Google searching shows that total Mir cards in circulation were 108.6 million as reported by the Central Bank of Russia. However, if you follow the link to the Russian Central Bank, you will find that you can no longer access it. Try it yourself: https://www.cbr.ru. Though, with a population of 142 million, according to the CIA World Fact book, the system better get tested for volume, if you consider FIS Global’s numbers on low usage.
