Russia demands $3.8bn security deposit from Visa and Mastercard

[dipsydoodle]

Source: Guardian

International credit card companies face a "severe impact" on their operations in Russia following a strict new law Moscow has adopted in response to Visa and Mastercard freezing service to banks under US sanctions.

Visa described the regulations as "unprecedented" and Mastercard said it could experience difficulties, the Russian magazine Snob reported, after Vladimir Putin signed a law on Monday to create a rival national payment system.

The law stipulates the creation of a homegrown system to facilitate cashless transactions by 1 July, but also imposes stiff new requirements on international payment systems operating in Russia.

>

The new law forbids international payment systems from cutting off services to Russian clients and obliges them to base their processing centre in Russia. To ensure their good behaviour, international operators will have to place a security deposit in Russia's central bank equal to the average value of two days' worth of transactions.

Visa and Mastercard together processed $1.9bn (£1.12bn) in transactions per day last year – 90% of all cashless payments in Russia – equal to a $3.8bn security deposit, the Moscow Times reported.

Read more: http://www.theguardian.com/world/2014/may/06/russia-security-deposit-visa-mastercard-sanctions-ukraine

[jtuck004]

1. The "invisible hand" gets nailed. n/t

[EmilyAnne]

3. Not exactly, but whatever makes you happy, I guess. nt

[Jesus Malverde]

2. How do you say boo hoo?

[davidpdx]

29. Cute

[Cha]

36. Really? I think it's

stupid.

[davidpdx]

49. Well then again I'm in Korea so I'm used to the kind of over exaggerated gestures

[snooper2]

32. do you happen to be Russian? you have this great love for mother Russia-

Or is it just that Pootie is so AWESOME?

[Jesus Malverde]

54. Just looking for my peace dividend...

and not a member of the duck and cover generation, trying to relive my glory years.

The hatred against others is easy to generate and turns on a dime when it's convenient. Take a trip to Vietnam sometime, it might blow your mind. 50K dead americans and a million vietnamese for NOTHING.

I'm not much into bandwagoning for the Military Industrial Complex. To lay down the foundation for their business they rely on hate, suspicion and fear. I'm more curious than that and I don't like living in fear, I guess that makes me a foreigner.



Getting rid of your TV helps.

Russians are people like you and me, and surprisingly the ones I've met better educated than most Americans. In some ways this is all a replay of the Nixon-Reagan years. We live in a period of unending wars. The first step, is to stop the hate.

[Obnoxious_One]

55. Yeah totally he must be a commie, you better shove some freedom Vodka down his throat...

USA! USA! USA!!!

[dixiegrrrrl]

4. Financial chess....gotta love it.

[The Second Stone]

5. Russian economy is going to tank

worse than it has already.

[EmilyAnne]

6. The amount of time it will take to simply design the system will have a huge effect on

the Russian economy.
Then it will take about 3 years to implement it.
Never mind when it will be accepted outside of Russia.

[The Second Stone]

8. Nobody gives a hoot about the Ukraine, nobody knows where it is

but trying messing with American banks and see what that gets you.

[EmilyAnne]

9. Pretty much. Which is sad for a whole different set of reasons. nt

[Erich Bloodaxe BSN]

51. And think of the hacking opportunities....

The credit card companies have had a LOT of time to work on making their systems as failsafe as possible. Russia better hope they can poach some first tier coders and security types to work on this project, or else the new systems are going to be serious targets for hackers the world over.

[DeSwiss]

40. Goodbye!

[Major Hogwash]

7. "I'm king of the world!"

No, not exactly, Putin . . sit back down and finish your borscht!

[joshcryer]

10. This new system will be used by the oligarchs to launder money.

It's incredible what the Russian people are allowing themselves to be subjected to.

[steve2470]

13. my guess is the vast majority of the people are scared

I was in Moscow in 1989 when Gorbachev and perestroika were in effect. The ONLY people who seemed happy and smiling were the young people. Anyone over, say, 30 was dour and grim and doing their best to go about their day.

I know things are different now than 25 years ago, but supposedly that was a GOOD period in Russia. Things were liberalizing. Putin seems to be reverting back to quasi-Soviet times. I think the people who demonstrate in public are very very brave, especially if they are confronting the regime. Even in 1989, I know for a fact that the KGB monitored my visit due to my being an American tourist. We were required to have a humorless guy go along on our tour. The hall monitor lady had to call someone to inform them we were leaving the hotel. If it was like THAT in 1989, I can imagine how things are now.

Before someone scolds me, I'm not trying to say Russia is 100% inferior to the USA. The Russian people were good to us and seemed quite decent. However, you can't really understand the place if you haven't been there. I have. I'll stay here, thank you very much.

[TBF]

23. I'd love to visit sometime -

it is interesting to hear from those who have visited and their impressions. My guess is that the average man or woman on the street is very much as we are here. Even though we "elect" representatives they pretty much do what they want and capitalism as a system dictates much that is done overall imo.

I don't think we can justify going to war just because we don't like somebody. Putin presents as a thug, but I'm sure the leaders of Rwanda were the same and we didn't get involved there. For many of us it is at that level - we don't believe that protecting capitalist interests is a reason for sending our young men to die in war.

[Cha]

37. Like they have a choice, josh.. but, here we have the net putinistias cheering on the

dictator.

[Fearless]

11. Umm... yeahhh... not happening.

[nilesobek]

12. The banks will pay the deposit

I predict. Its amusing watching the Ruskies clamp down on western choke points like this.

[joshcryer]

14. They can hand over control to Russia and not pay the deposit.

I think they'll go that route since their income from Russia combined is 4 times smaller than the fee.

Allowing the Russian central bank to handle transactions, though, means that they open themselves up to Russian corruption, and that too can have risks.

[dipsydoodle]

16. Its a deposit covering 2 days of transactions

Not a fee as such unless they break the terms.

[joshcryer]

18. From the point of view of the accountants, it's a fee.

They can't trust that the US won't put out further sanctions that would cause the "deposit" to be withdrawn.

[davidpdx]

31. That is likely what the Russians are up to anyway

They will take the fee and refuse to refund it. If I were the credit card companies I'd simply announce that because the Russian Government has imposed the fee, as of July 1st they will no longer be doing business with anyone in the Russian Federation.

See how long the fee lasts after what tourism they have dies because people can't use credit cards in Russia. It would put them into a recession pretty quickly.

[DeSwiss]

41. Indeed.

- The place is lousy with Achilles Heels. As precarious as the fiat economy is, you'd think they'd know better. But they're arrogant assholes who control the currency printing presses. So, what the hay? Right?

[msanthrope]

15. I await the Snowden/Greenwald outrage on this...it makes money-laundering

much easier.

[melm00se]

17. $3.5billion?

You think in might cost $3.5 billon to build a Russian system?

[Adrahil]

19. Visa and MC should Putin to get fucked.

Russia is a teeny tiny part of their business. Fuck 'em.

[jakeXT]

20. Fuck the EU, Fuck Russia ... soon there will be nobody left to fuck /nt

[Adrahil]

21. So you advise paying this ridiculous deposit? Why? NT

[dipsydoodle]

22. Credit card companies referred to have no choice.

Last edited Wed May 7, 2014, 10:03 AM - Edit history (1)

Its a provision for a contingent liability. Whilst in place their loss is lost interest.

Now compare that with potential loss of gross profit :

$1.9bn / day X 365 days X say 2% = c. $14bn p.a.

[The Magistrate]

24. Are You Suggesting Credit Card Companies Make 700% Interest Yearly, Sir?

I know the modern suit makes the old 'six for five' vigorish shark look like a piker, but 2% a day for a yearly rate of 730% seems a bit large to me....

"Some men rob you with a six-gun, and some with a fountain pen."

[dipsydoodle]

25. No

$1.9bn / day X 365 days provides the annual turnover figure and the c. 2% refers to average transaction fees.

[The Magistrate]

26. Fair Enough, Sir

What a business....

[joshcryer]

34. Interest is monthly on liability, not daily on transaction.

They aren't making $14 billion in Russia. It's closer to $750 million.

[The Magistrate]

35. If He Is Refering To the Charge On Transactions, Sir, The Figure Makes Sense

Merchants are charged something for using the card system. This is why, in some instances, you can get a small discount for paying cash on pricey items, since the merchant has included the tariff to the credit card company into the usual price, and come down a bit and still take in more, and to immediate deposit, by a cash payment.

[joshcryer]

44. No way they collect $14 billion in fees but only clear $750 million.

That would imply insane overhead.

[The Magistrate]

45. I Have No Idea, Sir, What the Actual Net From Russian Operations Is

But if the daily amount charged is what is stated above, then the amount claimed for collected fees yearly on transactions would seem reasonable.

Interest collected on unpaid balances is a different stream of revenue.

[joshcryer]

46. The assessment fee is 0.11%.

That applies to all volume: http://www.cardfellow.com/blog/credit-card-processing-fees/

$1.9 billion * 365 * .11% = $763 million. And that's where the net comes from.

Their combined Russian revenue in 2013, at 0.1 percent of transaction volume, looks to have been about $724 million, although that may be a generous estimate: Mastercard says Russia accounts for 2 percent of its revenues, a mere $167 million in 2013.

http://www.bloombergview.com/articles/2014-05-06/the-biggest-loser-from-russia-sanctions-visa

To me $14 billion in income seems unreasonable though the math checks out, I don't think it's profit. For card holders that pay transaction fees (and not the assessment fee which applies to volume) it can go many different ways as per the link I provided, some may just have a flat rate, some make take a percentage, some may have holding fees, whatever. Those fees go to pay for the merchant system overall and I don't think could be considered "profit." Visa and Mastercard could be kicked out of Russia entirely and that merchant system would be used by other card companies, like Russia's nationalized card they're suggesting.

[The Magistrate]

47. Thank You, Sir

The inner workings of the card system I am not familiar with. I appreciate the information.

[dipsydoodle]

48. Sample link which provides details of charges here.

This was just chosen at random and refers to Canada. The figures expressed you would find to be pretty much universal.

How credit card fees for merchants work http://www.thestar.com/business/personal_finance/2013/07/23/how_credit_card_fees_for_merchants_work.html

The range quoted of from 1.5 per cent to 3 per cent is also applicable to cash withdrawals. I used a figure of 2% for merchants and cash combined. The gross profit I quoted was across the entire system, Visa, Mastercard and the banks using those facilities , and so must be roughly the $14billion figure I used.

Similarly the amount withheld by way of deposit , £3.8billion , causes loss of interest on that amount for 2 days to one party or another within the overall system.

[The Magistrate]

52. Interesting, Sir

But it does not seem to support the idea that the transaction charge is profit to the company. Having become acquainted with those charges from a merchant's point of view ( more years ago than I care to remember, when I was still in the jewelry trade ), I had always considered them to be pure rake-off, but the account at your link describes them as something that mostly passes on to the banks which make money available for the transactions.

[joshcryer]

53. You're focusing on merchant fees.

The credit companies don't see those fees, they only see assessments fees: https://instoredoes.com/blog/making-cents-of-credit-card-processing-fees

Interchange fees are paid to the cardholder bank (to take care of issuing and maintaining cards and signing up retailers to accept them), not to the credit companies. If anything the interchange fees (which make up the lions share of the costs) would be lost to Russian banks who issue VISA or Mastercard if VISA or Mastercard just up and disappeared, assuming they jumped ship anyway. And only temporarily.

[Adrahil]

30. Ya know, some things are more important than profit. NT

[karynnj]

33. You ignore the other conditions:

The new law forbids international payment systems from cutting off services to Russian clients and obliges them to base their processing centre in Russia.

The first requirement could mean they are being told to violate American or Russian rules if a Russian client is sanctioned. Which do you think these American firms will choose? As to basing their processing center in Russia, do you think they want to do this? This would likely be an additional cost and would further subject them to Russian control.

Seriously, who benefits more from Visa/MC/AE being available in Russia? Russians trying to sell products, hotels, and restaurants OR the credit cards and their users?

[The Magistrate]

38. I Agree It Would Be Hard For the Companies To Go Along With This, Ma'am

And I do not expect they will.

[Jesus Malverde]

50. ^^^thread win^^^

The hate is endless, like our investment in the military.

Where is our peace dividend?

[DeSwiss]

42. Wake up. n/t

[Jesus Malverde]

59. My mom's already on it.

[tridim]

27. Snowjob reccomends Putin use Bitcoin.

Because as a non-government issued and libertarian approved currency it is 100% perfectly secure. Ahem.

[Obnoxious_One]

57. Snowjob! Bwhahahaha!!! OMG that's so funny! OMG! I hate him more already!

Showjob! Snowman, Snowsnow!!! OMG The creativity!!!!

Thank God!!! We don't have to talk about the substance of the criminal behavior he exposed! We can just call him names!!!

Fantastic!

[jberryhill]

28. "the Russian magazine Snob reported"

Who was the centerfold model this month?

[DeSwiss]

39. ''...Putin signed a law on Monday to create a rival national payment system.''

- Oops. Well, no one ever said the sacrifices for spreading democracy would be cheap. However, I'm sure VISA and MasterCard didn't think they'd be on the altar......

K&R

[center]
[font size=1]''Sarah, your drapes are ugly!''[/font][/center]

[Ash_F]

43. That new system is going to make the Healthcare.gov launch look immaculate. /nt

[Obnoxious_One]

56. Sounds pretty fair to me, I hope Russia is succesful with their cashless transaction system.

[link:

&feature=share&list=PLkatqS6YCCkOM9z0EKl_xABtaaTK2qTD4&index=8|

[polynomial]

58. The language of Russia mystifies me

The syntax and semantics are unique which is very different from the American language system. I have always been suspect that Russia would eventually over take America in the concept of capitalism.

Also this SCG.news is an interesting web site. I like many others find our mainstream media is not serving the population, just the special interest.

Even commercials from my view are a good example in the concept of political power Gerrymandering, especially the reverse mortgage commercials give opportunities the build political voting blocks.

This Ukraine news is a powerhouse in truth. Again history is repeating itself. Now the suggestion that fascism is the core in the political unrest in that part of the world is not a surprise for me. It seems somewhat simple that the elite push the population with arrogance and deception that eventually leads to wild violent change.

What’s dreadful is behind the scenes in the military complex, America has developed a lot of cracks. America has more solders committing suicide than death in combat. A very telling statistic, besides the huge security breach by Snowden or perhaps many more America does not know about.

America has its own secret mercenary Nazi army the so called Black-Water outfit. Would not be surprised if America is connected to Ukraine politics through the Bush Nazi party.