‘Mir,’ Russia’s new plastic money option, unveiled

Russian authorities have unveiled ‘Mir’, a ‘Visa’-like payment card prototype as the plastic option for internal payments, the Russian business daily Kommersant reported.

Mass production of the new card, called ‘Mir’ (World), will begin in 2016.

Officially presenting the card in Moscow on May 29, Olga Skorobogatova, the Central Bank's deputy head, said the manufacturers of America’s ‘MasterCard’ and Japan’s JCB have already shown interest in issuing co-branded cards with ‘Mir’. Manufacturers of the new card view the BRICS countries as future partners in the project for an integrated payment system, Skorobogatova said.

According to Ilya Balakirev, chief analyst at the investment company UFS, Mir’s development is happening “at such a rapid pace,” that it has already led to “various kinds of technical problems.”

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It will take some time to understand whether the system works and whether people will be confident about using it, Balakirev said.

Russia goes it alone

The issue of the payment card is part of a large-scale program to create an autonomous financial system in Russia, launched as a countermeasure to the sanctions imposed against Russia by the U.S. over Moscow’s role in the Ukrainian crisis, which resulted in  international payment systems Visa and Mastercard ceasing to process card payments for customers of several Russian banks in March 2014.

To avoid a repetition of such a situation, on April 1 Russia launched a national payment system, in which payments are processed within Russia. The issuing of plastic cards is intended to be the next stage of the implementation of the system, which Visa and Mastercard have now joined.

"The idea of establishing a national payment card was not a direct result of the sanctions,” said Dmitry Bedenkov, head of the analytical department at Russ-Invest. “Although the activation of the process began after the introduction of sanctions, this topic had been discussed to varying degrees earlier. The transition to a sanctions regime just increased the relevance of creating domestic payment systems," he said.

According to the Central Bank, 10 Russian banks are ready to issue the new card, including the sanctioned Bank Rossiya and credit institutions in Crimea, where all recognized international payment systems pulled out following the imposition of sanctions and Russian banks have so far yet to venture. Incidentally, proposals for co-branding do not apply to the banks under sanctions.

According to Anton Soroko, an analyst at Finam Investment Holding, the physical production of a plastic card is a fairly cheap process, which cannot be compared to credit institutions' other operating costs, such as marketing costs or payroll.

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A helping hand from the state?

"It will take at least another few weeks for the prototype payment application for the Russian national card Mir to pass tests and show satisfactory results," said Vasily Yakimkin, Associate Professor of the Finance and Banking Faculty at the Russian Presidential Academy of National Economy and Public Administration.

To expedite work on developing the card, the Russian payment system may need to conclude special agreements with international operators like Visa, MasterCard or China’s UnionPay.

However, as Balakirev pointed out, the market is very sensitive to regulation in this area, and administrative resources can do a lot to smooth the way forward.

In particular, he said, the state could urge state-owned corporations to switch to the new Mir plastic card, requiring large companies to begin working with the system. Furthermore, with ‘Visa’ currently leading the market, other international systems could willingly agree to launch co-branded products with ‘Mir’, in order to gain some advantage, said Balakirev.

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