Mir breaks Visa-Mastercard duopoly in Russia

Mir breaks Visa-Mastercard duopoly in Russia

As Europe's proposed alternative to Visa and Mastercard takes shape, evidence from Russia suggests that an upstart rival can break the American giants' duopoly - if government is prepared to put its finger on the scale.

The European Central Bank has long-floated the idea of a home-grown cross-border scheme capable of taking on Visa and Mastercard.

Last year, a host of the continent's banks finally unveiled plans to take action through the European Payments Initiative (EPI), which promises a unified pan-European payment system, offering a card for consumers and merchants across Europe, a digital wallet and P2P payments.

While the task of eating into Visa and Mastercard's dominance is daunting, figures from Russia show that it is possible.

Russia set up the Mir national payments card network in late 2015 at the behest of President Vladimir Putin in response to US and EU sanctions over the annexation of Crimea, which saw MasterCard and Visa cut off services to several of the country's banks.

According to GlobalData, as of 2020, 74.6 million debit cards have been issued by Mir, representing 28.62% of all debit cards in circulation. Mir’s market share is now 25.3% in terms of transaction value.

However, this has required heavy state intervention of the kind that Europe seems unlikely to follow.

Russia's government passed mandates requiring public sector employees receiving state funds and welfare benefits to migrate to Mir payment cards. A similar mandate was imposed on pensioners.

Meanwhile, merchants with annual transaction turnover of more than RUB40 million ($0.5 million) are required to accept Mir cards. The threshold was reduced to RUB30 million in March and will drop to RUB20 million in July.

Chris Dinga, payments analyst, GlobalData, says: “Governments can introduce payment schemes and take over the domestic transaction landscape by driving adoption via mandates and regulation. Indeed, this could be the model the European Commission follows when it launches its own payment scheme".

Comments: (3)

A Finextra member
A Finextra member 02 June, 2021, 11:13Be the first to give this comment the thumbs up 0 likes

The Euro area plan to issue digital Euro would give more or less same impact on the payments market. The central bank would take over both the deposit business, payment accounts and retail payments services from the private sector with the digital Euro and likely appoint agents that do not neccessarily hold banking licenses to manage the practicalities. And manage to take away at least the debit card business from the hated but well-working American schemes. 

Chris Hamilton
Chris Hamilton - Hamilton Platform - Sydney 02 June, 2021, 11:511 like 1 like

Adoption challanges are huge, as has been observed, because of the massive network effects in retail payments. Incumbent networks don't have to be good, they just have to be ubiquitous.  

But the real problem here is one of time relative to the technology cycle.

If like me you follow developments in card, realtime payments AND crypto (in my experieince surprisingly few professionals do) you will have observed that the three are operating in parallel universes.  National card companies are (with honourable exceptions) continuing to fight the last war against Visa and MasterCard, while realtime services are rolling out everywhere, as banks seek to respond to challanges from Telcos and fintechs. Central banks think the future is all about CBDC; and of course private crypto thinks the world belongs to it.

So I think the best thing a regulator and community could do is agree on the overall market structure and evolutionary path.  If these streams are to compete, or at least co-exist, this should be clearly annunciated as policy; otherwise banks, telcos and others will waste a great deal of development effort; and if different players choose different things to work on, the alarming possibility is that none of them reaches critical mass. 

A Finextra member
A Finextra member 03 June, 2021, 06:05Be the first to give this comment the thumbs up 0 likes

This is a very good initiative and it would be really interesting to see how VISA and Mastercard react to the increasing competion they are going to face in their bread and butter business. Increasingly places like Europe, India, China are promoting their own payments schemes and cards to take on these giants. RuPay launched in India has become fairly successful and has managed to gain significant market share.