Russia may switch to national payment system after Visa, Mastercard block US-sanctioned Russian banks

Seven Russian banks were involved in the suspension. Washington’s move was meant to put pressure on 20 Russian individuals seen as members of President Vladimir Putin’s inner circle. These included Yury Kovalchuk, owner of Bank Rossiya and Sobinbank, and the Rotenberg brothers, who control SMP Bank and InvestCapitalBank.

One of these banks, namely Bank Rossiya, was directly targeted by the US government, which characterized it as “providing material support to these individuals.”

When the blocking of Bank Rossiya’s bank card transactions became known, President Putin reacted by announcing his intention to open an account at the bank himself as soon as this Monday. He also ordered Russia’s Central Bank to take the sanction-hit lender’s clients under protection and provide all possible assistance to them.

Russia’s response could go much further, however, with an amendment proposed on Friday to change the country’s payment legislation.

Visa and Mastercard resumed payment transaction services for clients of InvestCapitalBank and SMP Bank. Even though their main shareholders were affected by the sanctions, the banks as such were not targeted by the US government, which made the decision to block their bank card transactions unlawful.

Vladimir Grankin, president of Russian payment group Ocean Bank, has declared that the current situation is rather nonsensical. Russian citizens who receive their salaries through their Russian bank accounts and shop in Russian supermarkets have their bank card transactions processed by US companies in the US or other countries. While Russia perceived the abnormality of this situation “long ago,” Grankin noted, “building a national payment processing system is a complicated task – though last week’s events will accelerate Russia’s moves in that direction.”

In 2010, the national savings bank Sberbank deployed its own payment system, named PRO100, as part of Russia’s Universal Electronic Card (UEC) program. PRO100 is based on international banking standards and can be deployed on the same infrastructure, but all payments made through it are processed in centers located in Russia.

So far the UEC program has failed to reach its originally planned dimensions overall. Very few Russian banks have been connected to PRO100 – but the latest political developments “could bring a significant impetus to the project,” Sberbank vice president Alexey Popov unveils.