The recent military action in Crimea has conjured up memories of the Cold War, which some believe really never ended, especially now that Russia is flexing its muscles once more.
Back in the 1980s, blue jeans were smuggled into the Soviet Union because the Motherland wanted nothing to do with products from the consumerist West.
Today, Russia is facing a similar embargo, except on a much larger scale; with credit cards.
After Russia moved troops into Crimea, which is part of neighboring Ukraine, the United States imposed sanctions on certain Russian banks.
As a result, both Visa and MasterCard had to cease doing business with these banks, meaning credit card processing has been suspended for banking customers.
MasterCard told Bloomberg that it’s “open for business as usual,” but that service was suspended with Bank Rossiya, Sobinbank, and SMP Bank to comply with the sanctions.
Visa also suspended payment services with those three banks, along with Investcapitalbank, but stressed that the banks don’t represent a large chunk of the business they conduct in Russia.
And since then Visa has lifted its ban on SMP cards after receiving clarification from the U.S. government.
The banks affected supposedly have connections with individuals targeted by the sanctions, mainly billionaire businessmen in the country.
Russia Could Launch Its Own Payment System
In response to the move, Moscow said it could have its own homegrown payment system up and running in as little as six months.
And legislation has already been introduced in Russia’s parliament to ban foreign payment systems like Visa and MasterCard.
So they could effectively turn the tables on the world’s largest payment processors (and the U.S.) and keep things in-house.
However, experts find that severely unlikely for two key reasons. For one, it would mean that Russians traveling abroad wouldn’t have compatible credit cards to use.
Secondly, tourists visiting Russia wouldn’t be able to use their Visa and MasterCard-branded credit cards and debit cards, potentially causing such a plan to backfire tremendously.
So much like the Cold War that spanned for decades, it could all just be a bunch of rhetoric aimed at instilling fear and getting the sides to come to some sort of diplomatic agreement.
In reality, the worldwide dominance of companies like Visa and MasterCard would be hard to unseat, especially after Visa spent about $40 million upgrading card-payment infrastructure in Sochi and other parts of Russia before the Olympic Games.
Even if they did kick Visa and MasterCard out, Russians apparently aren’t too big on plastic to begin with.
Euromonitor International claims there are only about 30 million credit cards in circulation in the country, which equates to about one credit card for every five people in the nation of 143 million.
Still, they did somehow manage to issue the world’s most expensive credit card, which supposedly costs $65,000 to produce.
However, debit cards are much more popular, with roughly 192 million in circulation.
(photo: Jason Eppink)