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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

Friday, Oct. 31


Put your grammar and logical thinking to the test in a fun and friendly environment during the British Book Center’s Board Game Evening starting at 5 p.m. today. The event is free and all are welcome to attend.



Saturday, Nov. 1


The men and women who dedicate their lives to fitness get their chance to compete for the title of best body in Russia at today’s Grand Prix Fitness House PRO, the nation’s premier bodybuilding competition. Not only will men and women be competing for thousands of dollars in prizes and a trip to represent their nation at Mr. Olympia but sporting goods and nutritional supplements will also be available for sale. Learn more about the culture of the Indian subcontinent during Diwali, the annual festival of lights that will be celebrated in St. Petersburg this weekend at the Culture Palace on Tambovskaya Ul. For 100 rubles ($2.40), festival-goers listen to Indian music, try on traditional Indian outfits and sample dishes highlighting the culinary diversity of the billion-plus people in the South Asian superpower.



Sunday, Nov. 2


Check out the latest video and interactive games at the Gaming Festival at the Mayakovsky Library ending today. Meet with the developers of the popular and learn more about their work, or learn how to play one of their creations with the opportunity to ask the creators themselves about the exact rules.



Monday, Nov. 3


Non-athletes can get feed their need for competition without breaking a sweat at the Rock-Paper-Scissors tournament this evening at the Cube Bar at Lomonosova 1. Referees will judge the validity of each matchup award points to winners while the city’s elite fight for the chance to be called the best of the best. Those hoping to play must arrange a team beforehand and pay 200 rubles ($4.80) to enter.



Tuesday, Nov. 4


Attend the premiere of Canadian director Xavier Dolan’s latest film “Mommy” at the Avrora theater this evening. The fifth picture from the 25-year-old, it is the story of an unruly teenager but the most alluring (or unappealing) aspect is the way the film was shot: in a 1:1 format that is more reminiscent of Instagram videos than cinematic art. Tickets cost 400 rubles ($9.60) and snacks and drinks will be available.



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