A Bit More Detail

Bloomberg BusinessWeek's Carol Matlack and Elizabeth Dexheimer write about the possibility that Russia might get cut off from Visa and MasterCard as a result of post-Crimea sanctions. This would be serious, though as someone who has had his own issues with credit cards this might actually be a blessing for some Russians, at least until a domestic network gets set up?

Is Russia ready to cut up its plastic? After Visa and MasterCard stopped processing some Russian transactions in response to U.S. sanctions, Moscow says it could launch a homegrown payment system that could be ready in as little as six months, according to German Gref, chief of the country’s largest bank, Sberbank (SBER:RM).

Hard as it may be for Americans to imagine life without Visa (V) and MasterCard (MA), jettisoning them wouldn’t be all that difficult. Moscow has been preparing for the past few years to issue an electronic payment card that citizens could use for transactions with the government, such as tax and pension payments. Expanding that to include private purchases wouldn’t be hard, says Avivah Litan, an analyst at Gartner Research (IT): “If the banks are all on board, they can use the existing [card-reading] equipment in the retail stores. They’ve been thinking about it for so long, it’s just a matter of flipping the switch.”

Legislation has already been introduced in Russia’s parliament that would ban the use of payment systems based outside of the country. “The fact that our banks use infrastructure that they cannot control carries a real threat for national security,” lawmaker Vladislav Reznik said in introducing the measure on March 21.

Such rhetoric is a particular slap in the face to Visa, which was one of the top corporate sponsors of the Sochi Winter Olympics and recently spent $40 million on upgrades to card-payment infrastructure in Sochi’s Krasnodar region and other parts of the country.

Getting rid of Visa and MasterCard would cause two very big problems for Russia, though. A government-issued payment card wouldn’t be accepted outside the country, so that Russians going abroad would either have to pay in cash while they travel or—more likely—try to get a card from a foreign financial institution. And Russia could essentially forget about attracting foreign visitors if merchants there could accept only Russian-issued plastic.

This was the only decent photo I took of the vodka pool covering the atrium of the CIBC's headquarters. Yes, the symbolism is heavy-handed.