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Russian Banks to switch to Chinese payment system UnionPay after Visa and MasterCard suspend operations in Russia

Along with Russia's own banking payment system MIR which was launched in 2015, Chinese company UnionPay will be managing the card payment systems of Russian banks.

Several Russian Banks would soon start issuing banking cards using the system of Chinese operator ‘UnionPay’ along with Russia’s own Mir network. This came soon after American companies including Visa and Mastercard suspended their operations in Russia on March 5, as part of sanctions imposed by US govt over the invasion of Ukraine by Russia.

Prominent Russian Banks including Sberbank which is Russia’s biggest money lending institution along with Alfa Bank and Tinkoff have decided to use Chinese credit Card company UnionPay’s mechanism to issue credit and debit cards to their customers. An announcement for the same was made on Sunday.

The Russian banks need to use an alternate payment network as major American networks Visa and Mastercard will no longer work in the country, inconveniencing millions of ordinary Russians who have nothing to do with Putin’s decision to invade Ukraine. American Express and Paypal also have announced that they are suspending their operations in the country.

On Saturday, U.S. payment companies namely Visa.Inc, MasterCard.Inc and Pay Pal suspended their operations in Russia saying they would work with clients and partners to cease all transactions there. This would terminate all the transactions happening using MasterCard and Visa cards in the country. After the Western sanctions imposed on Russia which have frozen the country’s central bank’s assets worth $640 billion, the pulling out of payments firms is touted to be an increased worry for Russians who are bracing unprecedented inflation, economic hardships and shortage of essential imported goods.

What happens now?

Ever since its annexation of Crimea in 2014, Russia has taken steps to curtail its financial dependence on the West. Sberbank Rossii PAO, Russia’s largest lender said that the moves by American payment companies would not hinder Russian customers as transactions in Russia pass through its local domestic National Payment Card System which does not depend on foreign payment systems.

Along with Russia’s own banking payment system MIR which was launched in 2015, Chinese company UnionPay will be managing the card payment systems of Russian banks. As ATMs and business corporations in Russia will no longer support cards supported by foreign companies, Russian customers will have to switch to newer debit/credit cards issued by Russian banks supported with MIR and UnionPay. Notably, UnionPay already have significant presence in Russia, and a large number of Russians already use UnionPay cards issued by several Russian banks.

According to an UnionPay note issued in 2017, more than 85% ATMs accepted UnionPay cards for withdrawing Russian roubles. The company had said that about 600,000 POS terminals and 100,000 ATMs accepted UnionPay cards, and the numbers must have gone up in the last four years. Therefore, the transition from American companies to UnionPay should be smooth.

What is UnionPay ?

UnionPay which kicked off in 2013, is a Chinese payments managing company that issues banking cards and deals with operations related to banking transactions. With international recognizance in more than 180 countries, UnionPay International (a Global level subsidiary of China UnionPay) has issued banking cards in more than 70 countries. Headquartered in Shanghai, the company will soon operate in Russia in partnership with Russia’s local MIR.

Source: Business Insider

Amidst Russia’s global isolation, China has emerged as a key player in developing economic bonds with Russia. China and Russia also share close bilateral ties in trade which recorded a rise of 35.9% last year with total trade at $146.9 billion. The dragon also reverted to its own currency while pursuing trade with Russia with an aim to limit the US Dollar. The strategic bilateral partnership which has been underlined after Russia’s isolation by the West has is being termed the ‘DragonBear game’.

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OpIndia Staff
OpIndia Staffhttps://www.opindia.com
Staff reporter at OpIndia

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