MOSCOW, June 23 (RIA Novosti) – New draft regulations from the Central Bank of Russia submitted to the government make it much less troublesome for international card payment systems (CPS) to continue providing supplementary services, rather than trying to operate on a level of national significance, Russian newspaper Kommersant reported Monday referring to sources familiar with the legislative initiative and international card payment systems.
“Under these circumstances, it will be easier to stay in business simply processing the Russian systems and receiving less income, without becoming a nationally significant system and having to refocus on Russian technology, incurring significant costs, and even building a processing center inside Russia,” according to a source affiliated with one of the international payment systems cited by the newspaper.
According to a source familiar with the development of the document, all components of cards used by a CPS should be Russian-made, including the payment application for the chip. The law authorizes the central bank to set the ratio for the use of Russian-made software and programs, as well as requirements for the cards and chips.
Business insiders interviewed by the paper insist that the sovereign regulator’s requirements for Russian made software and devices effectively make it impossible for an international CPS to receive the status of nationally important.
“Physically, the transition to the use of Russian-made chips with a local payment application is possible,” said a source at one of the payment systems, stressing that for such cards to work abroad an international CPS chip would also have to be installed, which the draft regulation does not address.
Another factor working against international card payment systems becoming nationally significant would be the need for companies to reissue all existing cards.
Neither Visa, nor MasterCard have disclosed the volume of cards they issue, but, according to the central bank, as of April 1, 219.2 million cards had been issued in Russia.
Visa and MasterCard account for about 80 percent of that total, that is, they would have to reissue more than 175 million cards, another transition that would incur additional costs.
The legislative initiative to create a national card payment system in Russia began in early May in response to Ukraine-related sanctions that saw several Russian banks denied service by global powerhouses Visa and MasterCard. The two card payment companies said the sanctions dented their profits, adding they want to continue operating in the Russian market. The current set of new regulations is still being drafted and will require concerted effort from international CPS to keep their business in Russia.