The Russian Payments Scheme: Politics, Innovation and the Cash Problem

Daniel Gusev

One Day That Changed It All

The morning of the March 21,2014, was particularly chilly in Moscow, Russia, a country where temperatures vary widely and change unpredictably. The country’s political decision-making reflects the same weather fluctuations as years of indecision beinging cast aside by rapid and lavish nation-building, be it the Sochi Olympics, the G20 Summit in Saint-Petersburg, Skolkovo innovation hub or many other vanity elements that manifested an era of high commodity prices.

That day in March of 2014 saw some of the same spell of political weather, followed by a storm that people living in a particular building at Gashek Street in Moscow felt. They were no weathermen, but office workers at the Moscow office of Visa International, the credit card company. They were trying to acclimatize their business to the ramifications

D. Gusev (h)

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B. Batiz-Lazo, L. Efthymiou (eds.), The Book of Payments, DOI 10.1057/978-1-137-60231-2_19

of the recent political storm. They had only recently participated in a big marketing partnership with Qiwi,[1] the ‘cash-meets-digital payments’ platform, and had lobbied hard for the National Payments Bill not to come into effect and dismantle their vital interests in a promising market, where the number of Visa cards issued surpassed 100 million (as of the second quarter of 2013).

Yet, the damage was done and there was little they could do. That morning of the 21st of March, they received notice from San Francisco, California that Visa HQ would suspend its links with several of Russian Visa-issuing banks (all members of the VisaNet network). The decision, they were told, was pursuant to the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) placing VisaNet on the list of entities under sanctions. This was a direct response by the US government to the deteriorating situation in East Ukraine and its Crimean region.[2]

The response to official US sanctions in Russia was to throw the nationalism-driven rhetoric into “overdrive”. It also brought to an end to talks between the international players and regulators in the payment space. The local payment industry was then tasked to build a local structure that would permit:

  • - Uninterrupted retail payments for Russian users in case of external force majeure;
  • - A retail payments system that was untraced and otherwise out of the control of any international bodies (particularly those governed by US law);
  • - To capture greater financial inclusion as its great potential had been missed out by the intrinsic motivation of card usage in Russia.

  • [1] Qiwi is a publicly traded Russian payment service provider headquartered in Nicosia that operateselectronic online payment systems primarily in Russia, Kazakhstan, Moldova, Belarus, Romania,the United States, and the United Arab Emirates.
  • [2] A quick referendum was going to take place that would result in the region to be annexed byRussia the following week.
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