MOSCOW, May 15 (RIA Novosti) - Keeping the business in Russia will cost Visa and MasterCard much more than exiting the Russian market, Russian newspaper Kommersant reported Tuesday, citing a limited access report by US bank Morgan Stanley.
The bank’s subscription only study from May 6 titled The Russian Bear: Impacts on V and MA global investment evaluates the consequences of the recent amendments to the Russian law on the national payment system. The study gives the costs of at least $1 billion and $1.9 billion for keeping business against $160 million and $350-470 million of leaving the Russian for market MasterCard and Visa, respectively.
The amendments are intended to neutralize the risks of blocking card operations of Russian banks by the international payment systems (IPS) within the framework of sanctions against Russia. This is done through a security payment, equal to a two-day turnover for the respective IPS, deposited to a special account with the Russian Central Bank.
Based on the total daily turnover of cash and cashless card payments in Russia, Morgan Stanley estimates, that MasterCard will have to deposit $1 billion, and Visa would have to pay $1,9 billion as the security deposit, which is a total of about 100 billion rubles.
The security deposit is only the basic more evident cost that the IPS are going to face in light of the legislative changes.
“Payment systems operating in Russia will also have to build processing centers, as well as pay fines of up to 10 percent of the deposits with the Central Bank in case of unilateral refusal to provide services,” the study noted.
According to Morgan Stanley analysts, the share of Russian units in the total revenues of IPS totals 3-4 percent for Visa and 2 percent for MasterCard. Based on these assessments, as well as data reported by MasterCard and Visa, the net proceeds of these IPS Russian units are $160 million and $350-470 million, respectively.
Moscow has launched a legislative initiative to establish a national card payment processing system, as recent Ukraine-related sanctions saw several Russian banks denied service by Visa and MasterCard, raising concerns about the security of the country’s financial system. Russian President Vladimir Putin signed the relevant bill on May 5.
According to Russia’s Central Bank, building the infrastructure for the launch of the national payment system may take up to six months, but the distribution of the cards to the public could take up to two years.
Visa and MasterCard have announced they were concerned about the future of their business in Russia in light of the new legislation.
