Russia built parallel payments system that escaped Western sanctions

Crimea sanctions spurred Russia to build its own Mir payments network, taking the sting out of Visa, Mastercard exits.

Western sanctions have disrupted nearly every part of Russia’s financial system, but there is one big exception. The domestic-payments system continued to work smoothly after Visa Inc. and Mastercard Inc. pulled out earlier this month.

While the card giants’ exit from Russia was viewed as a significant move by many in the West, the reality on the ground was anything but. Most Russian consumers never lost the ability to use their Mastercard- and Visa-branded cards to pay for things within the country, according to WSJ.

The National Payment Card System — or NSPK, as it is known in Russian — oversees card transactions in Russia, even if those cards carry Visa or Mastercard logos.

The NSPK dates back to 2014, when Russia was sanctioned for its earlier invasion of Crimea. At the time, the Journal reported, Visa and Mastercard accounted for almost all of Russia’s card network activity, leaving hundreds of thousands of people with useless cards.

The Russian government saw they had a vulnerability, leading President Vladimir Putin to sign a law in 2015 that created NSPK and essentially forced Mastercard and Visa to turn over processing of the transitions to the new system.

That year, NSPK launched Mir, its own card network, although most Russians stuck with Visa and Mastercard. In 2017, Moscow passed a law requiring banks handling pension payments and public sector worker salaries to make those funds available through Mir cards, causing usage to jump from 2 million to 95 million between 2016 and 2020.

The WSJ noted that the departure of Visa and Mastercard still means that in many cases, Russians can’t use their cards outside of the country, and Mir cards are only accepted in a handful of countries, most of them former Soviet states.

The news comes just days after reports that Apple and Google had closed a loophole that allowed some Russians to use their mobile payment services in spite of the sanctions.

“Apple has informed NSPK it is suspending support for Mir cards in the Apple Pay payment service,” the National Card Payment System said last week. “Starting from March 24th, users cannot add new Mir cards to the service. Apple will stop all operations of previously added cards over the next few days.”