The Russian card payment market, which has been on a growth trajectory since 2017, is now facing a new challenge in the form of international sanctions and reduced consumer spending amid the ongoing crisis with Ukraine. As a result, card payments in Russia are expected to decline by 4.8% in 2022 to be valued at RUB102 trillion ($1.4 trillion), says GlobalData, a leading data and analytics company.

According to the latest data released by the Institute of International Finance, Russia’s GDP is expected to contract by 15% this year due to the Russia-Ukraine crisis, compared to the 3% growth that was previously forecasted. In addition, inflation is likely to soar due to rising commodity prices, currency valuation falling, and disrupted international trade. The deteriorating macroeconomic conditions will result in reduced household consumption, and in turn affect card spending.

Ravi Sharma, Lead Banking and Payments Analyst at GlobalData, comments: “Apart from macroeconomic factors, international sanctions imposed on Russia will also have adverse effects on its card market. The US, the UK and the EU have excluded some Russian banks from the SWIFT global payments system. Mastercard and Visa have imposed restrictions on multiple Russian financial institutions from using their network. Even digital payment solutions like Apple Pay and Google Pay have barred card holders of Russian banks that have been hit by the sanctions from using their services.”

Apart from card schemes, even international card issuers such as UniCredit Bank, and Raiffeisen Bank are considering exiting or scaling down their business in Russia. On March 23, Credit Agricole suspended its activities in Russia, joining a growing list of banks that are reconsidering their presence in the country.

The deteriorating economic conditions and isolation from global payment systems will have a significant impact on the Russian card payments market, resulting in reduced e-commerce and POS transactions.

Sharma adds: “While the card payments market will be impacted, this situation will benefit local card schemes as banks are likely to migrate from international schemes to ‘Mir’ cards, the local scheme, launched in 2015. It accounted for around 27% of Russian card transaction shares by value in 2021 and is expected to rise further.”

In addition to the Russian card scheme, Chinese payment giant China UnionPay is also likely to benefit with China opening its doors to Russia. Leading Russian banks such as Sberbank and Tinkoff Bank are already exploring the possibility of issuing payment cards in collaboration with China UnionPay.

Sharma concludes: “While the sanctions and the resulting exit of international card schemes and banks will impact the Russian card payments market, this in turn will create new opportunity for Mir cards and domestic banks to expand their market presence, as consumers are likely to switch to local players for uninterrupted access to banking and card payment services.”