Even though the three major credit card companies have announced suspension of operations in Russia, cards will still work in-country until their expiration date. Russia requires transactions to be processed inside the country, so credit card companies cannot affect cards issued by Russian banks.
Visa, Mastercard and American Express have announced they will suspend all operations in Russia in protest at its invasion of Ukraine.
But Russia’s major banks have already downplayed the impact the move will have on consumers.
Shoppers will still be able to use the cards for purchases within Russia until they reach their expiry dates.
But Visa, Mastercard or American Express cards issued abroad will no longer work at shops or ATMs in Russia.
Clients will no longer be able to use their Russian cards abroad or for international payments online either.
Visa and Mastercard alone control about 90% of credit and debit payments in the world, outside of China.
Earlier, Russia’s central bank insisted that all Visa and Mastercard bank cards issued by Russian banks would continue to operate normally on Russian territory. That is because domestic payments in Russia are made through a national system and don’t depend on foreign systems.
Russia’s biggest state-backed bank, Sberbank, said its cards would still work “to withdraw cash, make transfers using the card number, and for payment at offline as well as at online Russian stores”.
Since 2015, the Russian government has required all domestic payment transactions in the country be processed there. This followed similar suspensions of operations by Visa and Mastercard in Crimea, following its annexation.
Several Russian banks suggested that they would start issuing cards that use the Chinese UnionPay system, coupled with Russia’s Mir payment network, to avoid any impact for consumers.
Farida Rustamova, an independent journalist who left Russia because of the invasion, criticised Visa and Mastercard’s decision, saying it would cut off people like her from much needed funds.
She told the BBC she had raced to withdraw cash following the news as she hasn’t set up a foreign bank account yet, and many others face the same problem.
“Now thousands of people, including not only journalists but opposition activists and even common people who are scared of Putin’s regime and are running from war will be cut from their little money.
“And the sad thing is this is exactly what Putin wants to happen.”
Both Visa and Mastercard had already announced that they would comply with sanctions introduced by Western countries since the start of the conflict.
“This war and the ongoing threat to peace and stability demand we respond in line with our values,” said Visa boss Al Kelly.
In a statement, Mastercard also described the ongoing invasion of Ukraine as “shocking and devastating”.
The card company has operated in Russia for more than 25 years. It confirmed that it would continue to pay the wages of its 200 staff members there.
Visa added: “We regret the impact this will have on our valued colleagues, and on the clients, partners, merchants and cardholders we serve in Russia.”
It would not disclose how many Visa cards are in operation in Russia.
American Express called Russia’s attack on Ukraine “unjustified” and said it was also terminating all business operations in Belarus.
US President Joe Biden “welcomed the decision” during a phone call with Ukrainian leader, Volodymyr Zelensky, according to a White House readout.
‘Adding to financial turmoil’
Susannah Streeter, senior markets analyst at Hargreaves Lansdown, pointed out that the move came after the disconnection of Russian banks from the Swift international payments system and a dramatic plunge in the rouble.
“Bank customers in Russia may be able to keep using the cards until they expire, but the boycott means Russians abroad will see their payments rejected, with the shutting out of some big spenders also likely to hurt a raft of businesses reliant on their custom,” she said.
She added that China’s UnionPay is likely to be the alternative “system of choice” for Russian banks as it’s already accepted around the world, although not as widely as Visa and Mastercard.
“But it will take significant time to re-issue millions of cards, and will add to the financial turmoil in the country.”
The payments giants’ announcement comes amid a widening corporate backlash to Russia’s actions in Ukraine.
Inditex-owner Zara and French fashion houses LVMH, Kering and Chanel have all said in recent days that they would stop sales temporarily in Russia.
PayPal also said on Saturday that it had shut down services in Russia but that it would support withdrawals “for a period of time”.
This would ensure that account balances were dispersed “in line with applicable laws and regulations”, it said.
The Ukrainian government had been calling on PayPal to quit Russia and help its officials with fundraising.