United Card Service (UCS), which accounts for around half of all merchant credit and debit card processing in Russia, first announced its decision in mid-July after American Express agreed to give Russian Standard Bank (RSB) the exclusive right to issue and service AmEx cards in Russia, but a few days later resumed cooperation, saying that negotiations with RSB were underway.
The head of UCS, Vladimir Komlev, said progress at talks had stalled, and that RSB had failed to put forward an acceptable business offer to UCS, and had rejected all reciprocal proposals.
"We will stop servicing American Express cards in our network from 12:00 a.m. August 7, 2007," he said, adding that talks with the rival bank were unlikely to be resumed.
UCS services cards in 40,000 outlets, including large hotel chains, supermarkets, and travel agencies. Last year the acquirer earned between $320 million and $330 million from servicing AmEx, and accounts for at least 50% of the U.S. card company's sales in Russia.
Komlev said RSB had offered more favorable terms to certain UCS clients, if they switch to Russian Standard for card servicing.
He said American Express had been informed about the negotiations between UCS and RSB, and had "even intervened in the talks," but had failed "to bring the parties together."
On April 10 Russian Standard and American Express announced that they had signed a long-term agreement for RSB to become the sole legal acquirer for American Express merchants in Russia.
However, Komlev said his company would not suffer huge losses by cutting off AmEx. "We could lose 1%-2% of sales, but the market is annually growing by some 50%," he said. Most AmEx card sales come from foreigners on vacation or business in Russia, he said.
UCS serviced over 18.5 million transactions at 21,000 outlets in 2006, and its annual acquiring sales exceeded $2.5 billion.
