Major payment brands exit Russia

Four of the largest retail payments networks are pulling out of Russia in response to that country's invasion of neighboring Ukraine. Mastercard, Visa, American Express and PayPal are suspending operations in Russia effective this week. All four companies said they will continue donating to humanitarian relief funds helping Ukrainians.

The pullout of retail payment networks from Russia follows the decision to boot Russian banks off of SWIFT, an international messaging system that supports bank-to-bank wire transfers. "We don't take this decision lightly," said Mastercard in a statement. According to the website Statista, Russians carried about 250 million debit cards in their wallets in 2020 and 37 million credit cards.

In a March 8 statement, AmEx CEO Stephen Squeri said one of his company's core values is to do what is right. "This principle has guided us throughout our history and will continue to do so, as we stand by our colleagues, customers, and the international community in hoping for a peaceful resolution to this crisis," he said. AmEx is also suspending all business operations in Belarus, he added.

The pullout means that Visa and Mastercard credit and debit cards issued by banks outside of Russia, and AmEx cards, cannot be used in Russia, and Russian-issued cards cannot be used outside that country. It's a big deal, as analysts noted about 90 percent of card transactions outside of China are routed through the Visa and Mastercard networks.

Visa and Mastercard credit and debit cards issued by Russian banks can continue to be used domestically, and are expected to be processed through Mir, a domestic network with ties to the Russian central bank. Mir is an eight-year-old network, with limited capabilities, however. In a March 8 interview with the radio broadcast Marketplace, Lisa Ellis, a partner and payments analyst at MoffettNathanson, said Mir may be hamstrung when it comes to processing online card payments.

Trevor Culbertson, a research analyst at The Strawhecker Group, noted in a recent commentary that Mir captures just a quarter of processing volumes in Russia. He added that "eCommerce and POS transactions alike will become more difficult if not impossible for Russian consumers and merchants to execute."

Impact on financials, cybersecurity

Marwan Forzley, CEO of international payments company Veem, suggested the decisions by payment companies to pull out of Russia will have "a spillover effect" from the POS to other areas of commerce, including supply chains.

"Anyone with exposure to Russia and Ukraine is going to feel under pressure," said Forzley. He added that Veem has limited exposure in the two countries.

Visa and Mastercard, in recent financial reports, revealed similar financial exposures to Russia and Ukraine. Four percent of total revenues at each company comes from Russia; Ukraine accounts for 1 percent of Visa revenues and 2 percent of Mastercard's revenues.

Cybersecurity risks in the face of decisions to pull out of Russia seem to be on the minds of executives at companies pulling out of Russia. "Our cyber and intelligence teams will continue to work with governments and partners around the world to ensure that stability, integrity and resiliency of our systems continue to guide our operations and response to potential cyber-attacks," Mastercard stated.

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