Putin signs law on national card payment system
As a reaction to Crimea reunifying with Russia in mid-March, the US introduced targeted sanctions against Russian officials and Rossiya Bank, considered by the US Treasury to be a private bank for many Russian government officials.
Following the move, Visa and MasterCard stopped client operations for cardholders at Rossiya Bank, SMP Bank, as well as their subsidiaries Sobinbank and Investkapitalbank with no prior notice, causing a serious drop in the consumer confidence of the banks. According to Russian Central Bank estimates, building the infrastructure for the launch of the national payment system may take up to six months, but the distribution of the cards to the public could take up to two years.
Visa and MasterCard have announced they were concerned about the future of their business in Russia in light of the new legislation.
Newcomer Golden Crown aiming for the status of Russia's national payment system is believed to be a more viable candidate than the apparent lead contender Universal Electronic Card (UEC), finance sector observers say, citing a report from the Russian daily Kommersant.
According to the auditors, Golden Crown is 80% ready to run the payment process, although adjustments are needed in areas such as constructing an additional third data center. UEC is said to have estimated its own readiness to operate as the national system at 40%, still reported as facing significant processing tasks including construction of second, backup, and third, disaster-proof, data centers.
The Russian government has endorsed a bill to establish a national card payment system in a bid to diversify the country's financial system away from US-based global powerhouses Visa and MasterCard, which froze payments of cards issued by Bank Rossiya, Russia’s 15th-largest bank, after it was hit by US sanctions following Crimea's accession to Russia.
The Central Bank of Russia is already making plans for creating a national payment system in the country. It is yet to decide whether NPS should be created from scratch or developed on the basis of the already existing platforms, such as UEC, Kommersant says.
Sberbank is the major shareholder of the UEC with 45%, while Golden Crown, based in the Siberian city of Novosibirsk, is part of the Center of Financial Technologies group of companies.
Russia's national payment system
President Vladimir Putin said in March that Russia would create its own payment system. "These systems work successfully in such countries as Japan and China. They started off as national systems for domestic needs only but are now becoming increasingly popular," he said.
The Japanese system now operates in 200 countries. "Why shouldn’t we do the same? We should and we will," Putin said at a meeting with the leadership of the Federation Council, the upper house of parliament.
"We should create a system that will ensure uninterrupted domestic payments that make up about 90 percent of the total. We are preparing measures that should be realistic, unburdensome and gradual. At the initial stage we should ensure technological compatibility between processing and operating centres of major banks so that they could switch over quickly," Central Bank Chair Elvira Nabiullina said.