Visa Inc (V.N) and Mastercard Inc, both based in the United States, announced on Saturday that they were halting operations in Russia as a result of the invasion of Ukraine, and that they would work with clients and partners to stop all transactions there.
All transactions initiated with Visa cards issued in Russia will no longer work outside of the nation within days, according to the business, and any Visa cards issued outside of Russia will no longer work within the country.
“We feel obligated to act in response to Russia’s aggressive invasion of Ukraine and the deplorable actions we have observed,” said Al Kelly, Visa’s chief executive officer.
According to the White House, US President Joe Biden praised Visa and Mastercard’s decisions to cease business in Russia during a phone discussion with Ukraine’s President Volodymyr Zelenskiy.
“President Biden stated that his administration is increasing security, humanitarian, and economic aid to Ukraine, and that he is working closely with Congress to gain additional funds,” according to a White House summary of the call.
Russians are prepared for an uncertain future of escalating inflation, economic misery, and an even tighter squeeze on imported products as a result of the payments firms’ move.
Unprecedented Western sanctions against Russia have frozen a large portion of the country’s central bank’s $640 billion in assets, prevented many banks from using the global payments system SWIFT, and put the rouble into free decline, wiping off a third of its value this week.
Kyrylo Shevchenko, Ukraine’s central bank president, told Nikkei Asia on Monday that the central bank and Zelenskiy had requested Visa and MasterCard to suspend transactions of their credit and debit cards issued by Russian banks in order to put more pressure on the Russian authorities, according to the daily.
A increasing number of financial and technological firms have halted business in Russia. PayPal Holdings Inc (PYPL.O) made the announcement on Saturday.
According to Tass news, Sberbank Rossii PAO (SBER.MM), Russia’s largest lender, said the changes by Visa and Mastercard will have no impact on users of the cards it issues in Russia.
According to Tass, Sberbank’s customers will be able to withdraw cash, make transfers, and pay in both offline and online establishments because transactions in Russia are processed through the domestic National Payment Card System, which is not reliant on foreign payment networks.
For years, Russia has been working to strengthen the independence of its financial system, particularly after relations with the West deteriorated following the annexation of Crimea in 2014.
As an alternative to SWIFT, the country established its own banking messaging system, known as SPFS, and launched its own card payment system, MIR, in 2015. They were part of Moscow’s efforts to establish domestic financial mechanisms that are similar to Western ones in order to defend the country in the event that sanctions are expanded.
In Russia, Mastercard and Visa did a lot of business. In 2021, business performed inside, into, and out of Russia accounted for around 4% of Mastercard’s net sales. Meanwhile, according to a disclosure on Tuesday, commerce performed within, into, and out of Ukraine amounted for 2% of its net revenues.
Visa also revealed that Russia accounted for around 4% of its overall net income in 2021.
Mastercard, which has been operating in Russia for 25 years, has announced that its cards issued by Russian banks would no longer be supported by Mastercard networks, and any cards issued outside of Russia will not work at Russian shops or ATMs.
Following its recent action to block various Russian financial institutions from the company’s payment network, as mandated by authorities around the world, Mastercard stated it has decided to halt its network services in Russia.
Visa also said this week that it had barred a number of Russian financial institutions from its network in order to comply with federal sanctions implemented in response to Moscow’s invasion of Ukraine.