Mastercard in Russia

Main article: MasterCard

Performance indicators

2023: Net profit - 5.3 billion rubles

Mastercard The Russian subsidiary for 2023 received 5.3 billion rubles net profit, while a year earlier there were net losses at the level of 1.9 billion rubles. This is evidenced by data published in April 2024 in accordance with Russian accounting standards (RAS).

It follows from the report that the main part of expenses and income in 2023 fell on foreign exchange differences in the operations of recalculating the value of assets and liabilities payable in rubles. Previously, the provision of clearing services and encryption services was previously the main type of work of Mastercard LLC, but in 2022 the company suspended their provision, which called into question the further existence of a legal entity in the Russian Federation.

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The revenues of the Russian Mastercard from the foreign currency revaluation of assets in 2023 decreased to 9.1 billion rubles from 11.2 billion rubles in 2022, while the costs of foreign currency revaluation fell much more significantly - from 13.7 billion to 2.5 billion rubles.

Management expenses of Mastercard LLC at the end of 2023 decreased 5.5 times compared to the previous year, to 240 million rubles. In particular, labor costs decreased 12 times, to 80 million rubles. Other revenues of the company decreased by 25%, to 9.1 billion rubles, other expenses decreased almost 5.5 times - to 2.7 billion rubles, according to the company's data on RAS.

The reporting also says that the Russian subsidiary Mastercard in 2023 paid a windfall tax of 56.02 million rubles.

As of the end of 2023, Mastercard has not yet decided to liquidate or surrender the license, according to company documents. It also notes that sanctions against Russian organizations can "negatively affect the perception of market participants about the company's activities."^[1]

History

2022

Losses of $30 million due to the shutdown of activities in Russia

On January 26, 2023, Mastercard unveiled its financial performance. The report says that due to the withdrawal from the Russian market due to the current geopolitical situation, the company lost tens of millions of dollars in 2022.

At the end of 2022, Mastercard as a whole received revenue of $22.2 billion. In 2021, this figure was $18.9 billion. Thus, growth was recorded at the level of 18%. Net profit rose from $8.7 billion to $9.9 billion, or 14%.

The financial report notes that net pre-tax expenses for 2022 associated with the suspension of activities in Russia amounted to $30 million. Losses include general and administrative expenses of $67 million, mainly due to additional costs for employees and reserves for the hopeless balances of some sanctioned customers. These costs are offset by a net benefit of $37 million in rebates and incentives (counter-revenue), which include reduced liabilities as a result of lower customer estimates for some business agreements.^[2]

In 2022, Mastercard announced the suspension of activities in Russia. One of the main consequences of the company's withdrawal from the market is the termination of the work of cards issued in Russia outside the country. At the same time, Mastercard cards continue to work by the beginning of February 2023, but their owners may face various problems - they cannot pay for purchases despite the extended shelf life.

The Central Bank of the Russian Federation said that most of the terminals have already been reconfigured, and there are no more difficulties with paying with extended cards. And if "isolated cases" arise, banks quickly adjust the devices.

Losses of $34 million due to leaving Russia

Mastercard lost $34 million in the first quarter of 2022 alone due to leaving Russia. This is stated in the financial statements, which the American company announced at the end of April 2022.

These losses include general and administrative expenses, mainly related to reserves for the bad balances of some sanctioned customers. At the same time, most of the losses were compensated for by income of $30 million, caused mainly by a reduction in obligations, also associated with the termination of work in Russia, Mastercard noted.

Mastercard lost $34 million in the first quarter alone due to leaving Russia

According to the company's reports, the Russian market accounted for only 1% of revenue.^[3]

The Mastercard payment system has suspended its activities in Russia since March 2022, but by the end of April 2022, Mastercard cards issued by Russian banks can still be used in the Russian Federation. They do not work abroad and in foreign online stores. Mastercard transactions are processed within Russia in the National Payment Card System (NSPK), and sanctions do not affect them.

Customer funds in accounts tied to Visa and Mastercard cards of Russian banks are fully preserved and available, explained in the Central Bank of  the Russian Federation. Some banks have decided to extend the validity of all Visa and Mastercard cards. For example, Alfa-Bank extended it until the end of 2028  , Sovcombank did the same, MKB - until the end of 2030. There is no need to reissue cards. Gazprombank  and VTB reported that their cards will operate indefinitely.

Financial expert, economist Vladimir Grigoriev , in a conversation with Лентой.ру at the end of April 2022, suggested that Mastercard would return, but it is still difficult to say when this will happen. The timing is influenced by both political and technical issues. According to the expert, the company's losses from the shutdown of activities in the Russian Federation will be much more than the announced figures.

Suspension of activities in Russia

Visa and MasterCard announced the suspension of activities in Russia. This became known on March 6, 2022. Read more here.

Reduced transfer fee from card to card due to competition with SBP

The international payment system Mastercard from April 23, 2022 will reduce to almost zero the fees of banks for money transfers from card to cards when connected to the Mastercard Transfer Hub service platform. This will allow it to compete with the SBP of the Central Bank and motivate banks to connect customers to the platform and reduce commissions for customers.

Reduced fees for large online stores

The payment system Mastercard , following Visa, has reduced fees for accepting cards for payment for large online stores,, and Ozon Wildberries AliExpress others. From January 31, 2022, the size of the interbank commission (or interchange) will be 1.48% or 1.28% of the cost of goods, depending on the volume of online sales.

The difference is palpable. At the end of 2020, Wildberries' online turnover was 413.2 billion rubles, and Ozon's - 197 billion rubles.

2021: Entering fees for using 3D Secure technology

International payment systems Visa and MasterCard will make the transaction confirmation service 3D Secure paid for. banks More. here

Issue of 100 million cards in Russia

Payment card issue dynamics in Russia

2019

Launch in the Fast Transfer Payment System abroad

On October 10, 2019, at the V Finopolis 2019 Forum of Innovative Financial Technologies, Mastercard and the National Payment Card System (NSPK) announced a cooperation within which transfers abroad will appear in the Fast Payment System. Read more here.

Agreement with Xiaomi on the launch of Mi Pay in Russia

On June 6, 2019, it became known that Xiaomi and MasterCard signed a strategic partnership agreement in Russia. The agreement, under which the parties plan to work on the spread of payment innovations and the launch in Russia of the digital payment service Mi Pay. Read more here.

Agreement with Raiffeisen Bank on the development of the Cash with Purchase service

Raiffeisen Bank and Mastercard on June 6, 2019 signed an agreement on the development of a cash withdrawal service when paying for purchases at cash desks in trade and service enterprises. The document was signed by a member of the board of Raiffeisen Bank Nikita Patrakhin and the head of Mastercard in Russia Alexei Malinovsky. Read more here.

Agreement with Bank Zenit on the launch of the Cash with Purchase service

Bank Zenit and the Mastercard payment system on June 6, 2019 signed a protocol of intent to launch the Cash with Purchase service. Read more here.

2018: Mastercard expands presence in Russia

Mastercard announced in July 2018 that it is expanding its presence in the Russian market and is opening an "Innovative Space" in the Moscow office on Tsvetnoy Boulevard. The new site will be part of a global network of payment system innovation centers located in the world's largest megacities - New York, Singapore, St. Louis, Miami, Dublin, London, Dubai, Toronto, Mexico City, São Paulo and Tokyo.

"Innovative Space" is a window into the world of payment technologies of the future. Here are the most advanced world solutions that create the basis of the digital ecosystem. The platform will become a place for discussions, brainstorms and meetings with Russian partners - banks, trading companies, startups, accelerators, representatives of federal and regional authorities. In cooperation with Mastercard experts, market participants will determine new trends and solutions that are relevant not only for Russia, but also for other markets.

The space presents the main topics  and demonstration technologies and solutions, each of which is of interest to numerous partners of the company.

For example, bank representatives will be able to learn about Mastercard's payment security services, including the latest developments in biometrics.

Among the current technology solutions presented on the site is ID Check Mobile, or Selfie Pay, which allows you to confirm online purchases with card holder biometric data, including face recognition. To use the service, you only need a front camera in your smartphone. Selfie Pay is already operating in 37 countries and will appear on the Russian market in the near future.

Another key theme of the "Innovation Space" is Mastercard's developments in robotics and artificial intelligence for retail chains. These include digital payments in chats, humanoid robot Pepper, which will help customers order in a restaurant, VR shopping and an interactive smart mirror that allows customers to choose and pay for an item from the comfort of the fitting room in the store. All these technologies are radically changing the approach to the payment process, making it more ubiquitous, secure and personalized.

For the first time, not only international, but also local technologies will be presented in the "Innovative Space" in Moscow. A unique component is the zone with a demonstration of Mastercard technologies that contribute to the development of smart cities in Russia - transport solutions with contactless payment by bank card, resident card, fan card, mobile campus card - all this is already being actively implemented and available to Russian cardholders in a standard form factor and mobile devices.

"Russia is one of the most susceptible countries to innovation. Mastercard has been operating on the Russian market for more than 20 years and brings the most advanced world solutions: contactless technologies and tokenization are just a few examples, "notes Alexey Malinovsky, head of Mastercard in Russia. - The opening of the "Innovation Space" in Moscow is another step towards expanding our presence in the market and the further development of the payment industry in the country. I am confident that the ideas that will appear during the dialogue with partners and companies of the fintech sector in our Innovation Space will bring Russia closer to the digital future. "

2016

Revenue growth of 7%

According to the results of 2016, Mastercard Incorporated announced net income of $4.1 billion, which is 7% higher compared to ^[4].

Net revenue for the full year of 2016 rose 11% to $10.8 billion. The increase in revenue was driven by a 16% increase in switched transactions, a 12% increase in cross-border volumes and an 11% increase in total dollar transactions based on local currency and taking into account recent regulatory changes in the EU. These factors were partially offset by increased returns and incentive measures.

Total operating expenses for the full year of 2016 amounted to $5 billion, which is 9% higher than in 2015. The increase is mainly due to continued investment to support strategic initiatives, the absorption of the favorable effect of the exchange rate difference in 2015 and higher data processing costs.

Operating income for 2016 was $5.8 billion and up 13% from 2015.

MasterCard bypassed Visa in the number of issued cards in Russia

The MasterCard payment system bypassed its main competitor Visa in the number of issued cards in Russia. According to the annual report of the National Payment Card System (NSPK), MasterCard accounts for 49.4% of all issued cards, and Visa ­ - 44.7%.

At the same time, the payment systems themselves do not disclose the number of issued cards in local markets. It is noted that earlier the Central Bank reported on the number of MasterCard and Visa cards. According to him, at the beginning of 2012, out of 199 million issued cards, Visa accounted for 40%, MasterCard - 36%. In terms of turnover in retail outlets, Visa cards occupied 57%, MasterCard - 37%.

In total, as of January 1, 2016, according to the Central Bank of the Russian Federation, 243.9 million cards were issued in the country. In the world, according to the Nilson Report, the first place is occupied by the Chinese Union Pay - 53.07%, the share of Visa - 28.95%, MasterCard - 15.35%.

2015: Mastercard overtakes Visa on the American continent

In 2015, Mastercard overtook Visa in the Americas in terms of growth. At the same time, the latter is still leading in terms of market share by a large margin (43%)^[5].

According to the RBR study "Global Payment Cards Data and Forecasts to 2021," in 2015 the number of Mastercard cards on both American continents increased by an impressive 6%, while Visa this figure was 4%. Nevertheless, Visa remains the largest payment system in the region: of the 2.9 billion cards in circulation, 43% are issued by Visa, 26% by Mastercard. The share of cards issued by retailers under their own brands in total accounts for 23%, and their share is constantly decreasing, given that such cards often migrate to products of international payment systems.

It was in North America that Mastercard showed the greatest growth: in 2015, the number of its cards in Canada increased by 12%, in the United States - by 6%. In Canada, Mastercard-branded cards make up 40% of all cards in circulation today. The surge was helped by an agreement recently struck between the payments system and local retail chain Costco.

The RBR notes that major changes in the competitive landscape are often the result of transactions between payment systems and retailers. For example, in 2014, Walmart cobrand credit cards began to be issued in collaboration not with Discover, but with Mastercard, and in 2013 Best Buy entered into a credit card partnership with Visa, although it had previously collaborated with Mastercard.

As expected, the migration of Costco in the US market from American Express to Visa, which was announced in 2015, will positively affect the market share of the latter according to the results of 2016. In addition, Visa partnered with the USAA Automobile Association, as a result of which association cards will no longer be issued under the Mastercard brand.

2014: Shutdown of two banks due to US sanctions

In the spring of 2014, Visa and MasterCard payment systems, in connection with the introduction of Western sanctions against Russia, suspended the service of cards issued by Russian banks that were on the sanctions list. Among them were Rossiya Bank and SMP Bank. The Russian authorities decided to create a National Payment Card System in order to protect Russian banks from MasterCard sanctions^[6].

Visa and MasterCard were given a choice - to transfer domestic transactions for processing at the NSPK or place security contributions on special accounts with the Central Bank of the Russian Federation. Morgan Stanley Bank estimated these contributions at $1.9 billion for Visa and $1 billion for MasterCard. Payment systems recognized such amounts as excessive.

Payment systems recognized as nationally significant in Russia are exempted from paying contributions. On December 30, 2014, the Central Bank published a list of such systems, consisting of 51 points. Visa and MasterCard were not included in it.

In January 2015, it became known that the MasterCard payment system signed an agreement on the transfer of domestic Russian transactions for processing to the National Payment Card System (NSPK), which is being created in Russia. This solution allows MasterCard to avoid paying a security deposit, which is provided for payment systems that are not nationally recognized in Russia.

The Central Bank of the Russian Federation reported that a similar agreement with the Visa payment system is under discussion.

The Bank of Russia will act as a settlement center. JSC NSPK, the Bank of Russia and OOO MasterCard entered into a tripartite agreement defining the procedure for providing settlement services for the above operations.

Notes