FinancialServices

Payments prison break: Russian banks turn to China’s UnionPay in lieu of Visa, Mastercard, AmEx

Trade Finance Global ,TUESDAY MARCH 8, 2022

Russian banks are looking to China’s UnionPay in a bid to ease the impact of more financial sanctions from the West. 

The move comes after US payments firms Visa, Mastercard, and American Express announced plans to  suspend operations in Russia in response to its continued aggression in Ukraine.

Visa and Mastercard made a statement of their intentions on Saturday. “We are compelled to act following Russia’s unprovoked invasion of Ukraine, and the unacceptable events that we have witnessed,” said Alfred Kelly, chairman and CEO of Visa. “Visa will work with its clients and partners within Russia to cease all Visa transactions over the coming days.” 

In a company statement posted online, Mastercard said it will “ suspend our network services in Russia”, adding that “cards issued by Russian banks will no longer be supported by the Mastercard network regardless of where they’re used.” 

American Express followed on Sunday, announcing that it would suspend all operations in Belarus as well as Russia. “In light of Russia’s ongoing, unjustified attack on the people of Ukraine, we are suspending all operations in Russia,” American Express said in a statement released on its website. “We are also suspending all business operations in Belarus.”

Russia's way out ​

Financial Magazine, 01.01.2023

Following the economic sanctions placed on Moscow after the annexation of Crimea in 2014, Russia has looked to increase the self-reliance of its financial system to better safeguard its economy.

In 2015, the Russian government started building Mir, an alternative payment network, and has since required all domestic transactions to be processed through it. 

According to data from the National Payment Card System (NPSK), whose core business is cashless money transfers using Mir bank cards in Russia, NSPK total transactions was 32%, as of Q3 2021. 

Mir claims that it has seen a surge in demand for its payment cards after the announcements were made on saturday. Over the past week, customers of Russian bank VTB have opened 15% more Mir cards than in the previous week. According to Gazprombank’s data, the volume of Mir retail cards issued daily has increased five-fold since February 24. 

Sberbank has said that its customers can still withdraw cash, make transfers, and pay in offline and online stores thanks to the state-backed payment system.  

Russia has also set up SPFS, its own financial messaging system, as a substitute for SWIFT. 

China helping hand

Financial Magazine, 01.01.2023

Russian banks – including Sberbank, Alfa-Bank, and Tinkoff – have indicated that they will start issuing payment cards that use China’s state-owned UnionPay system, along with the Mir payment network, in an attempt to reduce the impact on their customers. 

Co-badged cards linking Mir and UnionPay will give the option for overseas purchases and cash withdrawals to Russian nationals. 

Russian banks, including Gazprombank and Rosselkhozbank, have used the UnionPay payment system previously. 

This decision may give Russia a route to re-integrate itself into the global financial system, albeit strengthening its ties with China in the process. 

UnionPay is an international payment system that operates in 180 countries, including Germany, Switzerland, Italy, and Spain, and thus will allow Russians to make international transactions. 

Ex-works deliveries

Financial Magazine, 01.01.2023

Let’s look at the concept of “delivery” in EXW Incoterms 2020. The buyer must carry out export formalities, which can be problematic, but are there other potential problems that the rule does not explain?

There are indeed much more than just Customs problems, there are many real-world practical matters such as but not limited to the buyer providing personnel or its carrier’s personnel who are unknown to the seller but accessing the seller’s premises; no suitable security checks and induction training of those personnel before entry to the premises; the buyer or its carrier providing unchecked machinery such as a forklift within the seller’s premises; the potential deleterious effects upon the seller’s security, health and safety procedures, insurances; even their liability for potentially having people working in their premises who might not be paid legal wages. Have you ever seen these dealt with in an EXW contract?