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Payments

These payment companies are cutting off Russia

ByJohn Adams
March 7, 2022 5:03 PM
Customers line up to use a Sberbank ATM in Moscow on Feb. 24.
Customers line up to use a Sberbank ATM in Moscow on Feb. 24.
Bloomberg
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Russia's invasion of Ukraine has drawn a rapid and widespread international response from many organizations in the payments industry.

Over the weekend alone, four of the largest U.S. payment companies — Visa, Mastercard, American Express and PayPal — announced bans in Russia. The actions are partially linked to western sanctions against Russian banks, and designed to curtail Russian domestic commerce and isolate Russian banking.

"The increasing global sanctions against Russia are another illustration of the expanding and complex landscape that puts immense strain on the private sector," said Charles Subrt, director of the fraud and AML practice at Aite-Novarica in Boston. "Expanding markets, faster payments and higher transaction volume are elevating sanctions risk in the digital age."

The moves are designed to create economic and political pressure on Vladimir Putin's government. There will likely also be a response from Russia, and additional compliance risks for western payment companies as anti-money-laundering and "know your customer" vetting become more complicated, according to Subrt.

"Keeping up with changes and efficiently and quickly applying them can be challenging tasks," Subrt said.

These organizations are involved in disrupting the Russian payment market.

Swift headquarters
Swift headquarters

Swift

Most of Russia's largest banks have been tossed from Swift, one of the world's largest messaging systems for cross-border payments. A Swift ban has been one of the more high-profile suggestions to retaliate against Russia. Before the invasion, a Swift ban was seen as provocative and a heavy lift politically, given the reluctance of countries such as Germany, which could face disruptions to energy payments.

As the severity of the Russian invasion became apparent, support for a Swift ban began to build, and in late February the expulsion went into effect.

The restriction complicates Russian money movement, but does not cut Russian banks off from the global market entirely. Russia has an alternative messaging system, though it is not as robust as Swift. And other responses will likely carry more impact: President Biden has said the direct sanctions on Russian banks with more than $1 trillion in assets are more far-reaching.
Visa building
Bloomberg

Visa

In the space of a few minutes on March 5, Visa and Mastercard separately announced suspensions of their activities in Russia.

That includes transactions made with Russian-issued cards anywhere in the world. And cards issued outside Russia will no longer work at Russian merchants or ATMs.

The card brands made their move after Ukrainian President Volodymyr Zelenskyy called for a ban during a video call to U.S. lawmakers.

Visa controls about a third of Russia's card payment market. Visa's response to the Russian invasion includes a $2 million grant to the U.S. Fund for UNICEF to support aid to the Ukrainian people, and matching employee donations up to $1 million.

"We are compelled to act following Russia's unprovoked invasion of Ukraine, and the unacceptable events that we have witnessed," said Al Kelly, chairman and CEO of Visa in the card brand's statement.
Mastercard logo
Bloomberg

Mastercard

Mastercard, which controls nearly 40% of the Russian card payment market, referred to the "unprecedented nature of the current conflict and the uncertain economic environment'' in announcing its suspension of Russian activities. "Our colleagues, our customers and our partners have been affected in ways that most of us could not imagine," Mastercard said in its statement.

Visa and Mastercard's bans will have a substantial impact on the Russian economy, given that the two card brands control nearly three quarters of the Russian payment card market. Including ATM access prior to a cash purchase, the sanctions connected to merchant acquiring and authorization of Visa and Mastercard payments could potentially disrupt 80% to 90% of retail transactions in Russia, according to Richard Crone, a payments consultant in San Mateo, California.

Russia's rival Mir card controls about a quarter of the nation's card market; and Russia's Central Bank has said some Russian banks may issue China's UnionPay cards, according to Reuters.
American Express lounge logo
Bloomberg

American Express

American Express announced a ban on Sunday with similar terms to the Visa and Mastercard bans. Globally issued Amex cards will no longer work at merchants or ATMs in Russia, and cards issued locally by Russian banks will no longer work outside of Russia.

Amex is also suspending operations in Belarus, which has been aiding Russia's invasion, and the card network has additionally halted relationships with banks in Russia that are covered by international sanctions.

Amex's bank partners in Russia included Sberbank — Russia's largest bank — which expanded its relationship with Amex last year to include more merchants and ATMS.

In a statement on the Amex website, Chairman and and CEO Stephen J. Squeri referred to Russia's invasion as "ongoing and unjustified." Amex has assisted clients with travel arrangements for employees attempting to evacuate employees in affected regions, Squeri said.
PayPal headquarters 2017
Bloomberg

PayPal

PayPal this past weekend notified the Ukrainian government that it would halt operations in Russia, and confirmed that in an email on Monday morning.

"PayPal supports the Ukrainian people and stands with the international community in condemning Russia's violent military aggression in Ukraine," said Dan Schulman, president and CEO of PayPal in the statement.

PayPal has raised more than $150 million for charities supporting the relief efforts in Ukraine, which Schulman said was one of the largest fundraising efforts PayPal had seen in a short period of time.

PayPal has suspended the ability to send or receive funds with Russian accounts, and has stopped signing up new accounts in Russia. PayPal's Russia ban extends to Xoom, a remittance company that PayPal acquired in 2015. Xoom provided direct deposits to Russian bank-issued Visa and Mastercard debit cards, executing payments by entering the recipient's card numbers.
CoinbaseBL823
Bloomberg

Coinbase

The response of cryptocurrency companies has been mixed, with some exchanges expressing reluctance to freeze Russian accounts. Cryptocurrency is also viewed as a potential way Putin could raise funds to offset the impact of bank sanctions.

Coinbase has taken a stand against Russia, announcing it has blocked more than 25,000 wallet addresses linked to Russian individuals or parties the cryptocurrency exchange believes are engaging in illicit activity as of Monday.

Coinbase has also shared the wallet addresses with the U.S. government to support sanctions enforcement.
Revolut app
Rafael Henrique

Revolut

The U.K. challenger bank has blocked payments to Russia and Belarus, and has also halted its support for transfers to or from parties in Belarus. The bans went into effect on Friday, according to TheBlockCrypto. Revolut did not return a request for comment by deadline.

Nik Storonsky, Revolut's founder and CEO, is a U.K. citizen but was born in Russia and emigrated to the U.K. when he was 20. Vlad Yatsenko, Revolut's co-founder and chief technology officer, is of Ukrainian descent. Both Storonsky and Yatsenko released statements last week condemning the invasion. Revolut has additionally supplied emergency, logistical and relocation support for staff in Ukraine.
Wise72121BL
Bloomberg

Wise

The London-based money transfer firm Wise last week suspended transfer services in Russia, reportedly following the international community's decision to block Russia from Swift.

Formerly called TransferWise, the company has roots in providing cross-border transfers and has added other financial services in recent years. Wise has worked with firms such as Alphabet to add new markets and speed for payment processing.

Like Revolut, Wise has been supporting Ukrainian staff who have been impacted by the invasion. A Wise spokesperson said the company is monitoring the situation and will comply with any government sanctions.
Apple Pay
Bloomberg

Apple

Apple has taken several steps to reduce its footprint in Russia, and has made donations to humanitarian efforts.

The company last week halted all product sales in Russia, and stopped exports into its sales channel in Russia, according to The Verge, citing an email from CEO Tim Cook to Apple staff.

Apple Pay and related services have been limited, according to Cook's letter. The Apple Pay ban appears to cover Russian banks that connect accounts to the mobile wallet. This ban has already resulted in long lines at commuter rail systems that use Apple Pay to pay fares. Apple did not return a request for comments by deadline.
Google Pay GPay
Bloomberg

Google

Google Pay has also been largely curtailed in Russia, similar to Apple Pay. The banks that support Google Pay and Apple Pay include VTB Group, Sovcombank, Novikombank, Promsvyazbank, and Otkritie FC Bank, according to an English transaction of a release from the Central Bank of Russia.

There are alternatives to Apple Pay and Google Pay in Russia that have built a critical mass of users. Twenty percent of online payment users in Russia use Apple Pay and 29% use Google Pay, but 83% use Sberbank's online payment service, according to Statista. These numbers were from 2020 and don't account for the recent sanctions on Sberbank.
western-union-bl012606b
Bloomberg

Western Union

Western Union had already begun pulling out of the Russian market before the invasion began.

Western Union, which has also announced humanitarian efforts in Ukraine, announced plans in early February to cease operations in Russia by April 1, citing reduced demand for its services, according to Reuters. Western Union did not respond to an inquiry by deadline.
Paysera
Lithuanian litas banknotes
Bloomberg

Paysera

Payment companies in Europe are also dropping business in Russia. Paysera in Vilnius, Lithuania, has closed accounts for Russian clients and has also halted payment processing in roubles.

Paysera transfers to Russian and Belarusian banks have been terminated if the recipient is a Russian or Belarusian company.

"While we understand that we are not a giant in the financial market, we do want to send the message that we can all have an impact through the choices we make. While we refuse to transfer money, someone else might refuse to insure, produce, advise, invest, or provide transport", says Gintautas Mežetis, CEO of Paysera, in a statement on Paysera's site.
John Adams
, American Banker
Payments Politics and policy
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