By 2025, foreign payment system cards are expected to phase out of circulation in Russia. Vladimir Komlev, the former CEO of the National Payment Card System (NSPK), revealed this plan, emphasizing the foresight dating back to 2014 when the Russian payment system “Mir” was developed and launched.
The disconnection of Russia from Visa and Mastercard went almost unnoticed in the domestic non-cash payment market, thanks to the effective implementation of the Russian payment system “Mir.” Russians increasingly opt for “Mir” cards to pay for goods and services. By the end of 2023, “Mir” accounted for over 52% of the total card transaction volume in Russia. Out of nearly 425 million cards used by individuals in the country, 256 million (51.6%) are Russian “Mir” cards.
In late 2021, nearly 75% of transactions were made using Visa and Mastercard. However, the situation changed with the introduction of sanctions and the withdrawal of foreign payment systems from Russia.
According to NSPK forecasts, by the end of the last year, “Mir” could occupy up to 70% of the market, with the potential to completely replace foreign brands by 2025. However, some experts question the feasibility of this scenario and whether creating another payment system in the country makes sense.
“Currently, banks practically do not suggest issuing Visa or Mastercard, but extend the validity of those remaining in the hands of many people. In fact, the ‘Mir’ payment system has displaced foreign monopolists, but due to the lack of competition, it is not rushing to offer attractive cashback deals to customers and is not developing its capabilities,” notes independent financial expert Alexander Pateshman.
System Player
NSPK served as an operator for Visa and Mastercard on the Russian market while developing and launching its own payment system, “Mir,” which became a worthy alternative to foreign competitors within the country amid international sanctions.
Even with the departure of foreign partners, NSPK continues to service their cards in Russia, allowing banks to smoothly transition to the domestic counterpart and avoid disruptions in non-cash transactions on the consumer market. NSPK expects that Visa and Mastercard cards will gradually lose relevance, and payment flows within the country will automatically shift to the “Mir” system.
In 2022, NSPK delivered over 116 million of its cards to banks, aiming to maintain similar volumes by the end of the previous year. NSPK not only operates the “Mir” system but also develops and maintains the Faster Payment System (FPS). The use of this system increased the speed of money circulation in the domestic economy by eliminating additional intermediaries from banking transactions.
Simultaneously, NSPK is developing its payment platform, Mir Pay, which six Russian banks have already joined. For active users of “Mir” cards, the company has introduced a premium version, Mir Supreme. This card grants access to business lounges at airports worldwide and offers a 7% cashback for restaurant expenditures. Currently, approximately 1.5 million Mir Supreme cards have been issued.
Mir cards may occupy up to 70% of the Russian market this year, and in 2025 they will completely replace foreign brands
Geography Lessons
Today, the main obstacle to the full use of the “Mir” card is restrictions on its usage in other countries, a challenge that business faces due to geopolitical issues. Some countries that initially allowed the Russian payment system later had to discontinue servicing it, fearing secondary sanctions from Western countries. While there is currently no direct sanction prohibiting the use of the “Mir” payment system, its operation abroad is significantly hindered.
Among the CIS countries that still accept Russian cards are Armenia, Belarus, Kyrgyzstan, and partially Kazakhstan. When traveling to distant countries, “Mir” cards can be used in Vietnam, Cuba, and Venezuela. All of this creates numerous inconveniences for travelers, who either have to obtain international system cards in third countries or carry cash with them.
Nevertheless, NSPK is not standing still and is working on an alternative method of cross-border payment using the FPS system. The company plans to develop it in a “consumer-to-consumer” (C2C) format by interacting with countries where a similar payment system is already implemented.
Each party sets its own rules on the territory under its jurisdiction, developing a joint regulation only at points of contact through a local bank. Major counterparties here may include credit institutions from neighboring countries and CIS countries, where both sides are interested in close cross-border cooperation.
QR payments, another area NSPK is working on, also have good prospects for financial interaction between countries. Currently, QR payments are widely used in Central Asian countries, closely tied to financial flows with Russia.
“For foreign settlements, Russians can still use Union Pay and cards from foreign banks. The question is for how long. Additionally, Russian banks are increasingly offering virtual (or digital) cards without a physical carrier for online shopping. For banks, this is a cost reduction,” says Irina Andrievskaya, Director of Content and Analytics at the financial marketplace “Vyberu.ru.”
Monopoly Game
The departure of Visa and Mastercard from Russia has made the “Mir” payment system a monopoly in its field, potentially leading to market stagnation, according to most experts. NSPK acknowledges this danger and has suggested that banks simultaneously develop their non-cash payment systems locally.
“We understand that today our competition will largely be shaped by those systems and bilateral interhost connections that are already forming on the banks’ side,” said Vladimir Komlev in an interview.
In response, the head of Sberbank proposed creating a competitor to the “Mir” system to balance the situation in non-cash payments. According to Herman Gref, this process could take about two years. Incidentally, the main bank of the country already has experience in this regard: a few years ago, the local SberPay system was successfully introduced, simplifying payment processing within the bank and through its terminals.
“The prospect of Visa and Mastercard leaving circulation in Russia poses both challenges and opportunities for domestic banks and companies. Replacing foreign monopolists requires attention to regulation, financial resources, and technological capabilities. It is important that Russian players are ready for this challenge and can ensure the stability and convenience of using new domestic payment systems,” concludes Maxim Ilgov, Director of Development at the financial technology company Only Bank.
Privatizing NSPK could be an alternative (currently, 100% of its shares belong to the Central Bank of Russia). Financial market participants buying some shares could influence the decisions made by the “Mir” payment system’s leadership. Back in November 2022, the Managing Director of Alfa-Bank, Vladimir Verkhoshinsky, made such a statement.
The company itself views these initiatives with skepticism, calling it a “desire to build a crystal bridge between Moscow and St. Petersburg”: it looks beautiful, but practical implementation is unlikely. As always, the decisive word in this discussion should come from the Central Bank of Russia, which considers it premature to list its own structure on the stock exchange. It’s understandable – in this case, the regulator will lose some levers in management, which, given the sanctions, will have a fracturing effect and impede the consolidation of the domestic financial market.
By Alexey Zotov