Several Russian financial institutions, including Sberbank, Russia’s largest investment banks by assets, Alfa-Bank, and Tinkoff Bank, indicated on Sunday they were exploring the idea of providing cards powered by China’s UnionPay.
Customer cards that utilize the UnionPay or Japan’s JCB systems, per another Russian bank, Gazprombank, will allow them to conduct cross-border transactions.
The workarounds demonstrate, in the face of western isolation, Russia may come to further depend on China.
In the absence of more clarification, it was unclear if the action represented a turn toward closer collaboration among Russia and China to assist Moscow in identifying alternate means of connecting to the world financial system.
American Express, Mastercard & Visa are all suspending operations in Russia. This will drive Russia to depend on Chinese-based payment systems such as UnionPay.
China is turning into a big winner due to Western globalist retaliation against Russian citizens.
— Kyle Becker (@kylenabecker) March 6, 2022
Union Pay is Taking Visa’s Place
UnionPay is widely accepted across China; its reach has grown internationally as more Chinese travelers venture overseas, frequently to purchase high-end products.
According to the company’s website, UnionPay accounts are accepted in shops in 180 countries and areas, as well as online in more than 200 nations and locations, including the United States.
As an alternative to the widely used worldwide payments network known as Swift, China has been constructing its very own payment processing system, in addition to its card network.
That system, on the other hand, continues to rely on Swift for the majority of its transactions.
BREAKING: Russia's state owned Sberbank is to replace VISA and MasterCard with a new "MIR" card system in partnership with China's Unionpay.
— Sunderland Global Media (@Sunderland_GM) March 6, 2022
Officials in Beijing have expressed opposition to the Russian restrictions, while in the West, numerous corporations are going above the penalties, ceasing all commercial transactions with organizations that are not sanctioned.
It is unclear how Chinese corporations will respond to this development. UnionPay and Japan’s JCB did not respond to attempts to contact them for comment.
Visa and Mastercard Terminated Contracts
Visa and Mastercard said on Friday they were terminating their business relationships with Russia in reaction to the country’s aggression on Ukraine.
Per the Nilson Report, a trade journal, Visa and Mastercard debit and credit cards accounted for 74 percent of all payment transactions in Russia in 2020, among some of the debit cards authorized by the country’s financial institutions.
Russian President Vladimir Putin suffered yet another setback after a slew of western corporations shut off services to the nation in the previous week.
Individuals and enterprises in western nations are prohibited from doing business with certain Russian banks because they’ve been sanctioned by the international community. Several Russian banks, on the other hand, continue to operate freely around the globe.
Although the United States and the United Kingdom have taken steps to prevent Sberbank from accessing the United States dollar and the United Kingdom pound, businesses and people are still permitted to conduct business with the bank.
Russia’s Visa and Mastercard cardholders will be able to use their cards to make purchases inside the country since the transactions will be routed via the country’s payments system, known as Mir.
However, they will not be permitted to even use the cards outside of the country, with the exception of a handful of countries that accept Mir, such as Turkey, Vietnam, and Armenia.
In a statement issued Sunday, Alfa-Bank said its clients’ Mastercard and Visa cards would be restricted in their usage outside of Russia, beginning March 10. It advised consumers who were traveling outside of the country to make withdrawals in the meanwhile.