Several Russian banks are planning to use China’s bank card service UnionPay as US services Visa and Mastercard suspend services in Russia, according to Reuters. Russia-issued credit cards using the Visa and Mastercard systems will stop functioning after March 9, part of a broader global economic backlash over the ongoing Russia-Ukraine war.
Why it matters: China could face more geopolitical pressure from the US. The country has toed a diplomatic line since the conflict began in late February, advocating for peaceful resolutions (in Chinese).
- US card operators Visa and Mastercard handle 90% of all debit and credit card payments outside China. Another US operator American Express said on March 6 that it will stop services for internationally-issued cards in Russia.
- Founded in 2002, UnionPay now has more than 1 billion users serving 180 countries and regions, providing cross-border payment services to cardholders and merchants.
- Some Russian banks have already adopted the UnionPay payment system, including Rosselkhozbank, Post Bank, Gazprombank, Bank St. Petersburg, Promsvyazbank, VBRR, Primsotsbank, Zenit, and Sovcombank.
Details: Russian banks, including Sberbank, Alfa Bank, and Tinkoff Bank, will use China’s payment system UnionPay to issue credit and debit cards.
- After Visa and Mastercard announced a suspension of operations in Russia on March 5, several local Russian banks said they will switch to China’s UnionPay. Sberbank PJSC said it’s looking into issuing new cards with Russia’s Mir payments system and China’s UnionPay.
- Alfa Bank, Russia’s largest private bank, will switch to UnionPay to issue cards.
- Tinkoff Bank stated that they have not issued cards with UnionPay, but will begin using the card provider as soon as possible.
Context: Russia launched what it called “a special military operation” on Ukraine on Feb. 24. Since then, the country has received a series of financial sanctions from the US and its Western allies.
- The US, EU, the UK, Canada has agreed on Feb. 26 to cut selected Russian banks off from SWIFT, a financial messaging system that helps the majority of banks around the world to process electronic funds transfers. Japan joined the move a day after.
- Western nations have also frozen the Russian central bank’s assets, limiting its ability to access its $630 billion reserves.
- Paypal shut down its service in Russia on March 5.