The newly proposed provisions of Russia’s law “On the national payment system” could result in the international payment system (IPS) wrapping up its activity in Russia, and Russian citizens being unable to use their cards abroad, writes Kommersant. Within Russia, cards belonging to foreign credit institutions may no longer be accepted. Russia’s State Duma will consider the second reading of the law on 23 July.
The amendments themselves are supposedly meant to maintain the continuity of card payments in Russia. They prohibit IPSs from suspending transactions involving the cards of Russian banks under international sanctions. The international payment systems will not be able to comply with this demand.
The bill introduces the concept of the “foreign payment system” (FPS) in such a way that the IPSs registered with the Bank of Russia do not fall under it, and must consequently comply with the rules pertaining to normal payment systems.
Currently, subsidiaries of Visa, MasterCard, China Union Pay, JCB and other systems are registered with the Bank of Russia.
Unless the rules are amended, within half a year it will be illegal to suspend the transactions of any bank due to sanctions, for example. If IPSs fail to comply, they will be de-registered and effectively banned from operating in Russia.
If the license of an IPS is revoked, all transactions on their cards within Russia will be suspended for a period, warns Dmitry Vishnyakov, an independent expert on the payment market. At present, Russia’s national card payment system has not signed contracts with banks, but with IPSs, which pay it for servicing their transactions within the country, and all of the settlement conditions are stipulated in the rules of the IPSs, he explains.
The IPSs will not begin to change the rules, instead they will simply wrap up their business in Russia, believes an expert familiar with how the systems work. The proposed rules are impossible for the companies to comply with from a legal perspective. The subsidiaries are obligated to adhere to the rules and demands of their parent organizations, and there can be many reasons to exclude certain banks from the IPS, adds Maria Mikhailova, deputy executive director of the National Payments Association.
Russian MPs and the Bank of Russia are insisting on passing the bill this session. The regulatory bank insists that “the Russian subsidiaries of foreign companies that are carrying out their activity in Russian territory must operate in accordance with Russian legislation, which protects the interests of citizens, financial infrastructure and Russian business”.