Visa Inc. and MasterCard Inc. plan to keep operating in Russia after President Vladimir Putin’s government backed away from punishing the payments firms in response to U.S. sanctions.
Visa and MasterCard executives met with senior officials including First Deputy Prime Minister Igor Shuvalov and came away “very positive” about finding a solution, Visa’s country chief, Andrew Torre, said at the St. Petersburg International Economic Forum yesterday.
Russia will consider easing new measures requiring the two U.S. companies to pay hundreds of millions of dollars to continue operating, MasterCard Russia chief Ilya Riaby said. At stake is an estimated $403 million in combined annual revenue for the two payments networks as well as their foothold in a market that’s shifting from cash to electronic payments.
After Visa and MasterCard stopped processing payments at four Russian banks in response to U.S. sanctions over the crisis in Ukraine, Russia passed a law creating its own national payments system and imposing rules for foreign firms that include fines for denying services and a mandatory security deposit starting in July.
The government is committed to working with Visa and MasterCard, Deputy Finance Minister Alexey Moiseev said in an interview with Bloomberg TV.
Moiseev said the U.S. companies agreed to create a “nationally important” operator within 18 months. Under the new law, such operators are exempt from having to post collateral with the central bank, he said.
The companies have not yet reached a formal agreement and “look forward to continuing the dialog,” Paul Cohen, a spokesman for Visa, said in a statement. MasterCard’s suggestions on changes to the new law were “regarded favorably” and the company expects a response soon, according to Seth Eisen, a spokesman.
Visa and MasterCard have said they get about 2 percent of their annual revenue from Russia, or about $167 million last year for MasterCard and $236 million for Visa. The two control about 95 percent of the payments market in Russia, according to Morgan Stanley. Visa is based in Foster City, California, and runs the world’s biggest payments network. MasterCard is based in Purchase, New York.
The bigger concern may not be the loss of revenue, “but the risk of losing the opportunity for domestic processing in Russia,” Darrin Peller, an analyst at Barclays Plc, said in a research note, adding that 80 percent of transactions in Russia are done using cash. “There will likely be a middle ground reached.”
(A previous version of this story was corrected to remove an erroneous combined revenue estimate in the third paragraph.)