Russia was recently excluded from the SWIFT payment system and VISA and Mastercard suspended their operation for Russians. However, Moscow had an alternative to VISA and Mastercard, UnionPay. Currently, the Chinese alternative is helping Russians at the time of western sanctions.
What is UnionPay?
UnionPay, launched by China in 2002, is a state-led financial services network headquartered in Shanghai. It offers debit cards, credit cards, and pre-paid cards, alongside services like cross-border remittance.
The company's cards are accepted in 180 countries including the US and Canada, and European nations like the UK and Germany. UnionPay cards are issued in 70 countries, and the company has now issued more than 150 million cards globally, according to Fortune. UnionPay has a second market share after Visa.
Russian Banks Turning to UnionPay
Russians started turning towards UnionPay last week due to the rising sanctions against the country. The sanctions had hit the Russian banks, leaving them to choose UnionPay cards which will be linked to Mir, Russia's central bank-operated homegrown payments system.
Russia's state-affiliated Sberbank is also now finding out ways to issue UnionPay cards and the country's biggest non-state bank, JSC is already in the process to launch cards based on the UnionPay.
Meanwhile, Tinkoff has also confirmed that it is working on the plans to offer UnionPay cards.
The practice of shifting to a new payment system is not new for Russian banks as to when Kremlin annexed Crimea in 2014, Western sanctions had poured in forcing Russia's third-largest bank Gazprombank to issue UnionPay cards for its clients.
Afterward, a series of mid-sized lenders like Rosselkhozbank, Pochta Bank, Bank St. Petersburg, Promsvyazbank, Russian Regional Development Bank (VBRR), Primsotsbank, Zenit, and Sovcombank began operating under the UnionPay system. Last December, Russian Standard Bankâthe country's leading consumer lenderâannounced that bank customers could transfer money to the Chinese system's cross-border money transfer service, according to Fortune.