Visa, Mastercard vs Russia, Putin

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visa_masterDouble jeopardy for Visa and Mastercard
Both Visa and Mastercard are in danger of losing their foot hold in Russia. The problem comes after the US imposed sanctions on some Russian individuals, organizations and banks. Four banks were sanctioned two of which were SMP bank and Invest Capital bank, both are owned by brothers Boris and Arkady Rotenberg, both of which had their merchant account services suspended by Mastercard and Visa.
Russia fights back
Russia has hit back by announcing new laws that would result in Visa and Mastercard having to pay millions of dollars into the Russia’s central bank. This would be used as a guarantee which will be lost should they stop servicing any other customers of the banks in the future.
Who has the most to lose, Russia or Visa and Mastercard (America)
As most Americans could not imagine a world without Mastercard or Visa, but for the average Russian these are not part of everyday life. An estimated 30million credit cards are in use in Russia which has a population of 143 million, whilst the US has 176.8 million people using 1.5billion cards, and a population of an estimated 319 million, the average having 3.5 credit cards. According to Morgan Stanley, Visa has estimated revenue from Russia of 471 million USD, whilst Mastercard has estimated revenue of 167 million USD.
Russia’s game plan
The Russian Government is looking into ideas to form their own electronic payment services, which is nothing new, for the last few years they have been working on plans to issues cards to their citizens so they can make governmental payments such as taxes, so to roll it out into a broader spectrum would not cause too many issues.
Visa and Mastercard game plan
Charlie Scharf CEO at Visa and Ajay Banga CEO at Mastercard are both hoping to negotiate their way around this, as they clearly do not want to lose Russia but nor do they wish to submit either, as this would lead to a precedents that could have catastrophic implications for them. All eyes are watching closely to see if more sanctions will be implemented which could deal the fatal blow.