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Visa, MasterCard to pay $3bn to stay in Russia - Morgan Stanley

Published time: May 15, 2014 15:30
Reuters / Jonathan Ernst

Reuters / Jonathan Ernst

Under Russia's new legislation, Visa and MasterCard will have to pay $3 billion in ‘security fees’ to continue operating in Russia, more than five times higher than the companies combined revenues, a new Morgan Stanley report says.

Under the new plan, Visa will be required to pay Russia’s Central bank $1.9 billion, and MasterCard will have to fork out $1 billion, according to an estimate by Morgan Stanley, Kommersant reported on Thursday.

Russian President Vladimir Putin signed a law on foreign payment systems on May 5 that requires foreign payment systems to be levied at 25 percent of an average amount of transfers profit during one calendar day in Russia, to be paid each quarter to the Central Bank. The law will be enacted on July 1.

Morgan Stanley has calculated that it is unprofitable for both Visa and MasterCard to continue to work in Russia.
The Morgan Stanley Report titled “The Russian Bear: Impacts of V and MA” said the fees will be more than five times the two companies’ combined annual revenue in Russia. Analysts at Morgan Stanley report net sales for Visa to be between $350-470 million, and $160 million for MasterCard.

A possible loophole would be to create a separate, non US-owned entity to run the Russian Visa and MasterCard divisions. Visa already has such an operation in Europe.

“MasterCard has worked in Russia for more than 20 years. We are continuing to study all components of the new law, and are sure that some of the provisions will not only create serious difficulties for our operations in Russia, but will damage the Russian market of electronic payments in the long-term,” the company told Kommersant in a statement, adding they “continue to work closely with government agencies, financial institutions, and commercial enterprises in Russia.”

Visa has declined comment on the report.

The first wave of US sanctions prompted a mix-up with Visa and MasterCard, which led to unlawful payment freezes at three Russian banks in March and demands from the Russian government to compensate for the mix-up.

The $3 billion (100 billion ruble) estimate is much higher than the original 80 billion ruble lawmakers previously discussed slapping the companies with.

Visa and MasterCard control 90 percent of the Russian payment systems market, but Putin said that both companies will lose market share if there are any future payment disruptions.

The creation of a National Payment System (NPS) for Russia is being worked out by the country’s central bank, with the government hoping to complete work on the project within the next six months.

Comments (63)

 

Drake Chen 22.06.2014 19:14

Mastercard will find a way,they always do.
Visa just going to operate a russian subsection.

But yeah seems the russians are getting pissed off.
You don't want to make a bear angry cause he lashes out.
I guess the Ukraine plot and subsequent unsuccesfull diplomatic negotiation has deeper consequences,
They find themself treated unfairly atleast they are going after the companies that hurted them.
Instead of blaiming US government, guess wiki leak sure is cheering, paypal escaped cause they didn't join the boycott ;)

 

Jugga 19.05.2014 00:26

Good, US wants to hurt Russian Businesses. What's good for the goose is good for the gander!

 

Terry Ross 18.05.2014 21:24

Paul Ryan 16.05.2014 14:26

I could have sworn a country has just taken the land of another country recently

  

and I CAN swear that that the population of Crimea voted to secede from Ukraine and to seek accession with Russia. Somehow your comment overlooks the pesky detail of such a referendum.

View all comments (63)
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