Over the last few days, I have been reading multiple websites to check and verify things, not just relying on the typical news channels. Mastercard and Visa have suspended operations in Russia. According to TASS, Russian news agency, Chinese UnionPay will replace them. Russia has the Mir network and that network will continue to process domestic transactions; Visa and Mastercard affect only international transactions: “Mir has processed most domestic payments in Russia since 2015, while foreign operators such as Visa and Mastercard continued to run international transactions. The operator – which is 100% owned by the country’s central bank – was established on government orders to protect the economy against sanctions imposed over Moscow’s annexation of Crimea in 2014.”
Consumers will still be able to use Mastercard and Visa-branded cards for domestic transactions in Russia, the country’s state-backed payments network has said, reducing the impact of the US firms’ decision to pull services over the invasion of Ukraine.
Russia’s homegrown payments system Mir said the cardholders would still be able to access their funds, make withdrawals and domestic transfers – at least until their bank cards expire.
Let me share some numbers: In 2019, Visa and Mastercard combined for a total transaction volume of $16 trillion globally; UnionPay China does around $16 trillion. (The largest network, though not just card, was AliPay at $18 trillion)
UnionPay handles close to 45% of all card global issuance; Visa and Mastercard do respectively 27% and 18%.
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I expect nations like India to begin to explore how to build/promote local alternatives to Visa and Mastercard. I expect India to promote RuPay massively now. Nigeria’s Interswitch Verve is also there. You never know; say an election mess and Visa and Mastercard decide to pull out; Verve can serve innocent citizens who live far away from Abuja!
As we discussed in Tekedia Mini-MBA on Saturday, the impacts of the Russia-Ukraine conflict will be huge and many companies will be massively affected. Russian firms like Yandex are already on life-support. But do not overlook companies like Visa and Mastercard to be under pressure: would you just depend on them if they can switch off?
Expect India, Brazil and some countries to begin to promote local brands to mitigate risks in future. In the last 5 days, both Visa and Mastercard have lost about 8% of their market caps.
More so, the movement and storage of wealth will begin to change. Since 1790 when the United States awarded the first patent, it has built a property-rights-first nation. In other words, the US and UK have supported property rights. In TASS, the Russian government has flipped the extraction against its citizens, reminding them what it has told them: those property rights cannot be depended upon, citing examples where Russians are now losing assets, companies, etc. It ended by saying: move all your assets back to Russia. In such, the head of the communication mocked those losing assets, for ever moving Russia’s wealth out of the nation.
People, what is happening in the world is convoluted. But one thing is evident: nations need thinkers who can connect the dots. The world has changed as a result of this current conflict and many layers have been opened. The impact will be felt for years. And China which will possibly buy more Russian oil and wheat will play major roles.
But as we write and analyze events, may we remember innocent Ukrainians and I will add innocent Russians, who are going to be adversely affected by this conflict. The world needs peace, fiercely urgently.
Several Russian banks said on Sunday they would soon start issuing cards using the Chinese UnionPay card operator’s system coupled with Russia’s own Mir network, after Visa and MasterCard said they were suspending operations in Russia.
Announcements regarding the switch to UnionPay came on Sunday from Sberbank (SBER.MM), Russia’s biggest lender, as well as Alfa Bank and Tinkoff.
Comment on LinkedIn Feed
Comment 1: This is a good example where most Americans don’t approve how Biden is handling the Ukraine issue. Now you will see companies playing a bigger role which will have more impact on Russia’s economy vs sanctions!
I commend all these companies for making this hard decision. Not only will this affect the global economy, it will affect Visa/MasterCard’s bottom line.
User Response to Comment 1: I love this piece, I wish Nigeria and entire Africa will wake up and look inward for our local home grown solutions, we are scattered over the global doing great things, I hope soon we will return and build the country of our dream for the benefit of our coming generation irrespective of our religion and tribe.
Comment 2: Russia is a bit like China, apart from the western infrastructure. You arrive in Moscow, no Uber but Yandex. Google is replaced also by Yandex. Chatting is Telegram. Facebook is replaced by VK, VKontacte. They are pretty much autonomous in term of software. Actually, they have very good, probably the best coders and developers.
Comment 3: The world has changed, we may not see it now. For the west to levy the type of nuclear sanctions on Russia they already know the consequences.
I believe they have an information not known to the public, especially coming immediately after Russia China agreement of no limits to relationship. And the now news that Russia did consult with China before the invasion.
The west have reasoned that events have already been put into place nonetheless.
What we are going to see is a situation where Russia is disconnected from the western trading system more like the soviet Union, with a minimal connection to China I areas that China can be insulated from the west.
Another scenario is China damns the west and integrates more with Russia hoping to attract more countries in the global South to their platform where they inturn being locked out of the west. Actually, this is the outcome that China dares and try to avoid.
So companies are increasingly going to choose which markets to operate in.
Comment 4: Our people at the corridors of power, do they even understand the global implications of the geopolitical and social imbroglio that is unfolding.
We are NEVER prepared. We talk and go to sleep. We don’t execute. After sleeping, we continue talking.
If it is private sector driven, the Government feels threatened, and yet the Capacity is NOT there.
Ordinary oil and gas we discovered in 1956, we CANNOT refine even a barrel today, we want already-made: importation of refined products.
Few days ago, it made news that Nigeria is bidding for Nuclear Power Plant! Wetin we wan use build the Nuclear Power Plant? Wood or Bamboo? Ajaokuta Steel Mill has not been completed since 1979, Delta Steel Company (DSC) in Warri was sold to an Indian Company who cannibalized the assets of the DSC.
With over 187 Trillion cubic feet of gas reserves under our legs, we don’t even generate enough power for the 4 most industrialized cities of Nigeria in a 24 hour period.
Local alternative is key, no wonder Charles Soludo is facing Innoson for all Government vehicles especially as USD inches towards #600 Naira.
But the truth is that the Abuja Political Squad don’t care, unknowingly to them, the apocalypse is not going to spare anyone.
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Which ones are we building or how are we benefiting from the chaos? We are just on the sidelines while the spoils are shared.
Many of our people building businesses on Facebook, YouTube, IG and co, if these guys decide to cut us off based on perceived malfeasance of our politicians, what alternatives do we have or we start thinking of countries to relocate to? We have oil and gas but still lack the capacity to produce at scale, so that anywhere they announce shortage – we can quickly move in and supply the shortfall!
On tech, many of the things we have built will come crashing any day our headmasters don’t like the way we breathe or frown our faces; trouble.
Our population is larger than Russia, we are more populated than Brazil, yet these countries get mentioned when discussing things nobody even remembers there’s a large country called Nigeria.
As crisis happens, part of humanitarian relief is food, how many baskets have we produced and who are sourcing from us? We just get overlooked on virtually everything concerning global affairs, yet we don’t seem to be perturbed, because we are basically incapable of leading in anything. We need to be louder and show presence, and these are the sort of things I focus in for now.