Blocking of Mastercard and Visa in Russia does not prevent 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 US companies’ decision to withdraw services following a the invasion of Ukraine.

Russian payment system Mir said cardholders would still be able to access their funds, make withdrawals and domestic transfers – at least until their bank card expires.

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

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

“Until their validity expires, Visa and Mastercard cardholders have access to all funds in their accounts, as well as to all usual payment operations – paying for purchases, transferring funds from card to card, cash withdrawal, etc.”

The statement was released shortly after US companies said on Saturday they would suspend Russian operations in light of Moscow’s continued military assault on Ukraine.

On Sunday, American Express announced that it was also suspending all operations in Russia and Belarus. “In light of Russia’s continued and unwarranted attack on the people of Ukraine, American Express is suspending all operations in Russia,” the credit card company said in a statement posted on its website. “We are also ending all business operations in Belarus.”

The decision by Mastercard and Visa to suspend their operations in Russia will mainly impact foreign payments, which means that local consumers will no longer be able to use their Russian cards abroad or for international payments online. Foreign customers will also be barred from making payments to Russian businesses or withdrawing money in the country.

“Payments abroad, including to foreign Internet resources, will not be available with cards of international payment systems Visa and Mastercard 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.

On Saturday, Mir said he had already seen an increase in demand for his cards after the imposition of sanctions on Russian banks by the United States, the EU and the United Kingdom. According to its own statistics, more than half of Russians already had a Mir card in September 2021, accounting for 32% of all transactions.

The adoption is likely to play on critics’ fears that economic sanctions will only incentivize Russia to invest in alternative programs. Similar concerns have been raised about Russia’s blocking of Swift – the secure messaging 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 expanded that block on Saturday, saying its services there – mostly customers who transfer money to each other – had been suspended. It added that it would allow withdrawals “for a period of time, ensuring that account balances are distributed in accordance with applicable laws and regulations”.