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Visa, MasterCard Required to Pay $3.8Bln Security Deposit to Work in Russia

Published: April 28, 2014 (Issue # 1807)



  • Foreign payment systems will have to leave a security deposit at the Central Bank equivalent to the value of two days of transactions processed in Russia.
    Photo: Vedomosti

The State Duma on Friday passed a law tightening requirements on embattled foreign payment systems Visa and MasterCard and giving them new competition in the form of a national payment system.

Visa and MasterCard have been at the center of a political storm since U.S. sanctions forced them to cut services to two Russian banks in March. Faced with this demonstration of U.S. power, President Vladimir Putin led the charge to restrict their influence and turn the creation of a Russian payment system into a national security issue.

The law passed on Friday will require payment systems to ensure uninterrupted service, and obliges them to pay a security deposit to the Central Bank to guarantee their good behavior.

Foreign payment systems will have to leave a security deposit at the Central Bank equivalent to the value of two days of transactions processed in Russia. Visa and MasterCard together processed $1.9 billion per day last year, meaning that they will together be obliged to relinquish about $3.8 billion to the Central Bank.

The legislation comes into force on July 1, after which payment system operators will begin handing over the deposits in quarterly installments worth 25 percent of one day's transaction volume.

Operators will also have to immediately inform the Central Bank about any stoppages of service and the reasons for them. Employees at companies that violate these regulations will be liable for fines ranging from 100,000 rubles to 1 million rubles ($2,800 to $28,000). The payment system companies themselves will face a penalty of 10 million rubles ($280,000) for every day of suspended service if they are large enough to be classified as nationally significant. Smaller operators will lose 10 percent of their security deposits for each day of interrupted service.

Visa and MasterCard are currently the dominant players on Russia's payment services market Visa processes about 60 percent of payments in a market that saw transactions worth $740 billion last year. MasterCard accounts for 35 percent of payments.

These companies will also soon face a state-supported domestic competitor. Russia's new payment system will be built under the aegis of the Central Bank, which will gain full ownership over a new company that will operate the system. The Cabinet said last week the new system should be up and running within 6 months.

Visa is already feeling the squeeze the company warned last week that U.S. sanctions were damaging its transaction volumes, pulling its revenue growth rate down to four-year lows.





 


ALL ABOUT TOWN

Wednesday, Aug. 20


AmCham gets back to business after a summer hiatus with todays EHS Committee Working Group Meeting. Check their website for more details.



Thursday, Aug. 21


Time is running out to see the fantastic creations on display at the 2014 Sand Castle Festival on the beach at the Peter and Paul Fortress. Adhering to the theme of Treasure Island, visitors can wander amongst larger-than-life interpretations of pirate life or attend one of the workshops held to educate a future generation of sand artists. The castles will remain on the beach until Aug. 31.



Friday, Aug. 22


Get ready to pledge allegiance to the flag during National Flag Day, paying tribute to when, 23 years ago today, the iconic hammer-and-sickle was replaced with the tricolor that now flutters in the wind. Petersburgers will be treated to a free concert on Palace Square, a military parade and a culminating air show featuring Russias Russian Knights stunt pilots.



Saturday, Aug. 23


Uppsala Park plays host to Fairy Noon today, a performance of five separate fairy tales ranging from folk classics to more haunting selections. There will be three different renditions of the tales throughout the day and tickets start at 500 rubles ($13.80) for adults and 300 rubles ($8.30) for children.


Classic Finnish cartoon characters the Moomins expect to receive a warm welcome from Russian fans during todays Moomin Festival at the Pearl Plaza Shopping Center at 51 Petergofskoye Shosse. Become a kid again or introduce a new generation to the beloved creation of Finnish writer Tove Jansson.



Sunday, Aug. 24


The tortured genius of Dutch master Vincent van Gogh gets his day in the centers Konnushnaya Ploschad during Make Art Like Van Gogh, a daylong celebration of the artist that will allow amateur artists to try and replicate the work that made the famed painter world-renowned.


Experience a variety of dances highlighting the diversity of the world around as at the final day of the Ethno-Dance International Dance Festival that has been at the St. Petersburg Humanitarian University of Trade Unions this past week. Tonights performance will feature Egyptian dancers accompanied by local orchestras.



Monday, Aug. 25


Today kicks off the Elena Obraztsovoy International Competition for Young Vocalists in the large hall of the Shostakovich Philharmonic. Talented youngsters will showcase their range over the next six days before a winner is chosen on Aug. 30.



Tuesday, Aug. 26


Love movies but hate all those words? Then check out Rodina Cinema Centers Factor of Consensus film forum this evening. Silent movie classics from the beginning of the 20th century will be screened and accompanied by a pianist, who will provide the soundtrack for the ongoing action. The screenings begin at 7 p.m. Check Rodinas website for more details.



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