On March 10, both Mastercard and VISA pulled their business out of Russia to hit the country where it was most vulnerable – its financial system. Hoping to force the hand of Putin to stop the war, the companies worked with clients and partners to ensure that all transactions would go unprocessed within Russia. Only cards issued by domestic banks will work within the country cutting out access to business across the world.
With an overwhelming percentage of European Transactions being handled by VISA/Mastercard, the ramifications of the sanctions are devastating for online businesses. The adult industry in particular will be hit hard with no way to charge/collect for services. It’s not just Russian companies who are affected either – adult content providers outside the country who formerly marketed to Russians will also feel the heat of the sanctions.
Russia has not taken it lying down and have scrambled to fill the hole that VISA/Mastercard left by looking to use their local payments network Mir (mainly used in Russia for bank transfers and welfare and pension payments) and courting China’s card network, UnionPay. Their economy already in shambles with the ruble worth less than one cent since the war started, a stock market closed for days on end, reeling from the effects of SWIFT sanctions, and struggling with the inability to access their foreign reserves, Russian banks are hoping the UnionPay/Mir Band-Aid will shore up the economy. It’s highly unlikely.
Marketplace interviewed Lisa Ellis, a partner and payments analyst at boutique research firm MoffettNathanson, who said Mir “doesn’t have all of the more sophisticated capabilities. They may not be able to be used online.” Further, International transactions will not be possible with Mir, so Russia is attempting to solve that problem with China’s UnionPay. However, according to Ellis, UnionPay “so far, historically, has had very little issuance outside of China.” The company has 32% card market share across the world but only 1% in Europe. UnionPay is not going to have anywhere close to the reach that VISA/Mastercard had.
If the deal goes forward, it’s likely that China could be the only winner here. China, which has been careful to maintain ties with Russia while at the same time stay in the West’s graces by confirming that they won’t send financial aid and weapons to the country, has long been seeking to expand UnionPay’s global footprint – and this opportunity will do just that. Meanwhile, VISA and Mastercard each lose about 4% of their revenue from pulling out of Russia and online adult businesses will continue to suffer with the inferior payment providers.
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