President Vladimir Putin says Russia will set up its own payments system after MasterCard and Visa cut off services to several of the country's banks in response to US sanctions.
Plato, the Greek philosopher and author, coined the phrase to describe such a situation, ‘necessity is the mother of invention’.
So Mr Putin is vowing to do what the European Central Bank have been trying to do for years - create a third debit scheme to rival Visa and MasterCard. I wonder how long it will take. Monnet died as an option a couple of years ago - lets see what this one
is named as? The Cossack card has a nice ring
Funny enough, I've just said the same thing - they need a cute name to make it fly. "Cossack" indeed sounds good, if a bit too long.
There are several internal payment schemes in Russia already. Sberbank has a processing platform which can be used as a basis for the national scheme. So, it won't take them long to build it (EMV is overblown in specs, anyway).
To use the momentum to the full, they need to integrate "digital cash" and "Faster Payments" (with "Paym") within the same effort - that will be a killer.
Multi scheme approach sounds good, JCB has a good acceptance and is growing rapidly.
And the butchery begins :)
One of our clients already runs a central switching service for the
United Settlement System (USS) which provides a national ATM switch for Visa & MasterCard Branded cards, as well as a gateway to Union Pay.
The building blocks are already in place.
Several questions that came immediately to mind:
Does Russia have the technology to establish a viable, reliable network? (Without the help from a major non-Russian bank?) What about the infrastructure? (Could the Russian system use card readers already in place, for example?)
Here's the big one: How trustworthy would this system be from a purchaser's (cardholder) perspective? (From, say, a member of a rival political party?) Mr. Putin, like other politicians, seems to have no qualms using the various branches of his government
to harass/punish people/companies who disagree with him.
Or is this a knee-jerk response to sanctions? As one commenter noted earlier, the EU has been trying for years with no success.
A Russian card payments scheme has been expected for a while now. It should come as no great surprise. It will join the growing number of alternatives to Visa and MasterCard.
As for "hard to build" - take a look at MintChip. It's a resilient self-reconciling payments (digital cash) & processing platform. Creating a payment scheme from scratch in 2014 is not the same as doing that in the 50s (especially if you have no or little
legacy to support).
As for the existing retail terminals, taking transactions off the schemes' rails is the matter of BIN mapping on the acquirer level...
I would say, there large companies should try to be apolitical at times, otherwise they will certainly lose markets. This incident shows that a clear dependency that someone remote can choke the processing in some country at their will.
If this were just another domestic debit card scheme of the type that already litters the world then it would be no big deal. However Russia's ambitions go much further, and frankly tend toward a system of social control.
The Russian "Universal Electronic Card" system has been in planning for several years although recently it had run into technical and funding difficulties but this latest event may indicate that it is rising back up the political agenda. The UEC is intended
to be a single piece of plastic issued to every Russian citizen and governs access to state services including ID card, state benefits & pensions, digital signature etc, as well as debit card, ticketing and e-purse. Sounds convenient, but the flip side is
that anyone becoming "persona non grata" in Russia and had the card disabled could find themselves without access to banking and payment services as well as everything else, especially if alternatives are not readily available.
Country-specific payment schemes (e.g. Interac in Canada) make sense on many levels (political, technical, financial, strategic etc.)
Card-based solutions are passé. One needs to look at cloud-connected Secure Elements (not to be confused with cloud-based...)
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