World events impact global networks. With all the talk about banking sanctions against Iran, do not expect your Mastercard or Visa to work at Iran’s large retailer, Hyperstar. Will it lead to another domestic payment scheme such as Mir in Russia or RuPay in India as we mention in this review of the BRIC countries? Iran may have to do that if Trump invokes the full power of the Trade with the Enemy Act of 1917. (remember Woodrow Wilson?)
Jumping over to Russia is today’s read where Kyiv Post announced that Japan’s JCB card is about to enter Ukraine.
- The largest Japanese credit card brand, Japan Credit Bureau, or simply JCB, wants to start working with local banks to compete against Visa and Mastercard to provide cashless transactions in Ukraine.
- According to Ukraine’s National Bank, Takashi Suetsugu, chief executive at JCB’s international branch, promised on Nov. 5 to submit to the central bank all the needed documents to launch the company’s operations in Ukraine. Suetsugu didn’t specify the exact date, but he said it would happen soon.
- Smoly believes a new player could increase competition on the Ukrainian market of financial services, which is currently dominated by Visa and Mastercard. In the first six months of 2018, these two carried out 1.5 billion cashless transactions worth $21 billion.
JCB is a global brand but focuses highly focused in Japan but they have a bilateral arrangement with Discover that extends their reach
- JCB has 117 million users (90 million of them in Japan) and is the fifth biggest payment systems in the world in terms of numbers of credit cards issued and the value of transactions processed.
- In 2017, JCB processed operations worth $280 billion. Accepted in over 190 countries and territories, the company also issues cards itself in 23 countries, including China, South Korea, Japan, Thailand and Singapore. In 2018, the company announced its partnership with Russia’s Sberbank.
- In the United States, the company works in a partnership with the Discover Network, another credit card brand.
The question is this: Is JCB filling a void because MIR is floundering and the Russian Federation is hedging their bets on the MIR card? That is my takeaway from this article.
- Russia will accelerate work on reducing dependence on U.S. payment systems and the dollar as a settling money, RIA news agency mentioned Deputy Foreign Minister Sergei Ryabkov as saying on Monday.
- It’s a reaction to the new sanctions against Russia reluctantly signed into law last week by U.S. President Donald Trump. The sanctions targeted Russia’s energy industry, with new limitations on U.S. investment in Russian companies.
- “Your card is free of external elements. Produced in Russia,” runs an advertisement for Mir cards.
However, Mir may be a sleeper. Volumes are minute.
- Up to now, more than 13.9 million Mir cards are issued in Russia, according to the Russian National System of Payment Cards (NSPK), roughly 10 percent of the nation’s population.
- The Russian national payment system was created on 23 July 2014 and is 100 percent owned by the central bank. In Spring 2015, in the course of an all-Russia creativity competition, the name Mir and the brand logo were chosen.
- The Operator of Mir Card Payment System is National Card Payment System Joint-Stock Company.
- First Mir cards were issued in December 2015 in the framework of a pilot project. It is planned that Mir card will be widely spread across Russia. It is also envisaged to promote the card abroad under cobadging projects with international payment systems. Currently Mir Maestro, Mir JCB and Mir AmEx are already being issued.
Domestic programs protect against sanctions.
- Unlike international payment systems’ card transactions, Russian Mir card transactions cannot be suspended and no external economic and political factors can influence their processing. Moreover, Mir cards are welcome in sanctions-hit Crimea where Western banks are prohibited to operate.
- Banks are reluctant to issue them, as their cost is 35%-45% higher compared to cards belonging to more established payments systems. However, according to media reports, the Mir card issuance will cost 1.5 euros per card compared with 2 euros for its foreign rivals.
But, it is hard to beat a good old American Expres, Discover, Mastercard, or Visa!
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group