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Russia prepared for 8 years to be cut off from the West. Meet the payment system that’s still processing its credit card transactions



Since the start of the Ukraine War, a barrage of western sanctions has crippled the Russian economy and wreaked havoc on its financial system.

The country has been largely cut off from the international payment system SWIFT, seen its access to $630 billion in foreign exchange reserves restricted, and watched as more than $17 billion in assets were seized from Russian oligarchs.

But for the past eight years, Russia has been preparing for the worst.

In June of 2014, just three months after its invasion of the Crimean Peninsula, the country established its own payment system to help process credit card transactions domestically. Russia’s National Payment Card System—known to Russians as NSPK—has continued to process credit card transactions during the latest fighting in Ukraine.

Even though Mastercard, Visa, American Express, PayPal, and Discover have all suspended their operations in Russia, its citizens aren’t experiencing the type of disruption many might expect.

Mastercard told Fortune via email that credit cards issued by Russian banks are no longer supported by its network. Instead, credit cards being used in Russia are now processed over something called a “switch,” run by the Central Bank of Russia.

Dr. Leo Lipis, the CEO of the payments industry consulting firm Lipis Advisors, said that a switch is “a hub for communication that connects the various banks involved in a payments network.”

This means Russian consumers relying on locally-issued cards bearing the Mastercard logo can still use their cards like they normally would, Lipis noted.

A spokesperson for Mastercard confirmed in a separate email to Fortune that the company doesn’t have the ability to block domestic transactions in Russia, but it receives “no benefit” from them. This is because Mastercard, along with other Western companies, signed an agreement for their transactions to be processed by NSPK in 2015.

Russians are still blocked from using Western credit cards outside of the country, but that’s only helped the Kremlin’s goal of keeping assets from moving abroad. The sanctions also boosted Russia’s own credit card company, MIR, which is built on the back of NSPK and owned by the Central Bank of Russia.

When MIR debuted in late 2015, Russians were slow to adopt the card. Then, the government mandated that public sector employees receiving state funds and welfare benefits use MIR payment cards, spawning new growth for the firm.

“When you go back to 2015, Visa and MasterCard pretty much shared the Russian market 50-50,” Lipis said. “And by the time you get to 2020, the market is shared three ways.”

Today, there are more than 100 million MIR cards issued, according to the company. And with U.S. card companies leaving Russia, MIR can more easily grow its market share.

In recent years, other countries, including Turkey, India, and China, have also developed their own payment systems to limit the influence of U.S. credit card companies and limit the pain caused by any sanctions.

After the recent invasion, Russia’s largest bank, Sberbank, turned to China’s Union Pay and the so-called Cross-border Interbank Payment System (CIPS) in an effort to circumvent Western sanctions and issue new cards.

Union Pay has agreements with many European and U.S. credit card networks that allow foreign cards to be processed through its payment system and accepted in some Western countries, particularly in tourist destinations, Lipis said.

The payment systems expert noted that China’s Union Pay could be opening itself up to “secondary sanctions” from the West if it knowingly helps Russian banks circumvent sanctions.

Still, when it comes to processing transactions abroad, Russia’s MIR and the Chinese payment systems aren’t “adequate substitutes” for U.S.-based payment systems like Visa and Mastercard, Lipis said. And they carry less than 0.5% of the total value of payments made via SWIFT.

“There is some truth to the Visa slogan of it’s everywhere you want to be,” he added.

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IMF hikes global growth forecast as inflation cools



The IMF has revised its global economic outlook upwards.

Norberto Duarte | Afp | Getty Images

The International Monetary Fund on Monday revised upward its global growth projections for the year, but warned that higher interest rates and Russia’s invasion of Ukraine would likely still weigh on activity.

In its latest economic update, the institution said the global economy will grow 2.9% this year — which represents a 0.2 percentage point improvement from its previous forecast in October. However, it said that number would still mean a fall from an expansion of 3.4% in 2022.

It also revised its projection for 2024 down to 3.1%.

“Growth will remain weak by historical standards, as the fight against inflation and Russia’s war in Ukraine weigh on activity,” Pierre-Olivier Gourinchas, director of the research department at the IMF, said in a blog post.

The Fund turned more positive on the global economy due to better-than-expected domestic factors in several countries, such as the United States.

“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Gourinchas said, also noting that inflationary pressures have come down.

Global outlook is better but don't get too optimistic, IMF chief warns at Davos

In addition, China announced the reopening of its economy after strict Covid-19 lockdowns, which is expected to contribute to higher global growth. A weaker U.S. dollar has also brightened the prospects for emerging countries that hold debt in foreign currency.

However, the picture isn’t totally positive. IMF Managing Director Kristalina Georgieva warned earlier this month that the economy was not as bad as some feared, “but less bad doesn’t quite yet mean good.”

“We have to be cautious,” she said during a CNBC-moderated panel at the World Economic Forum in Davos, Switzerland.

The IMF on Monday warned of several factors that could deteriorate the outlook in the coming months. These included the fact that China’s Covid reopening could stall; inflation could remain high; Russia’s invasion of Ukraine could shake energy and food costs even further; and markets could turn sour on worse-than-expected inflation prints.

IMF calculations say that about 84% of nations will face lower headline inflation this year compared to 2022, but they still forecast an annual average rate of 6.6% in 2023 and of 4.3% in 2024.

As such, the Washington, D.C.-based institution said one of the main policy priorities is that central banks keep addressing the surge in consumer prices.

“Clear central bank communication and appropriate reactions to shifts in the data will help keep inflation expectations anchored and lessen wage and price pressures,” the IMF said in its latest report.

“Central banks’ balance sheets will need to be unwound carefully, amid market liquidity risks,” it added.

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Credit Suisse see Apple beating the Street this week for a few reasons



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Most Adani shares continue losses; founder loses $28 billion in month



Gautam Adani, chairperson of Indian conglomerate Adani Group, at the World Congress of Accountants in Mumbai on Nov. 19, 2022. Founder Gautam Adani, the richest man in Asia and once second only to Elon Musk, fell out of the world’s top five richest to rank seventh on the Bloomberg’s Billionaire Index.

Indranil Mukherjee | Afp | Getty Images

Shares of most of Adani Group companies continued to see sharp losses for a third consecutive trading session as the company attempted to rebut short seller firm Hindenburg’s report, which accused the conglomerate of stock manipulation and an “accounting fraud scheme.”

Adani Enterprises erased earlier gains of up to 10% and last traded flat in Mumbai’s afternoon trade after the group published a lengthy response of over 400 pages to Hindenburg’s report over the weekend, saying that it will exercise its rights to “pursue remedies” to protect its investors “before all appropriate authorities.”

Adani Enterprises’ stock price remains more than 25% lower in the month to date, Refinitiv data showed. It proceeded with a secondary share sale worth $2.5 billion, which were overshadowed by a rout that wiped out a total of $48 billion as of last week’s close.

Founder Gautam Adani, the richest man in Asia and once second only to Elon Musk, fell out of the world’s top five richest to seventh place on the Bloomberg’s Billionaire Index.

His net worth fell $27.9 billion year to date, the index showed. It peaked at $150 billion on Sept. 20, 2022, before falling to to $92.7 billion as of last week’s close, according to the index.

Despite small gains seen in Adani Enterprises, other affiliates of the Adani Group continued to plunge.

‘Attack on India’

Adani Group said Hindenburg’s allegations were a “calculated attack on India, independence, integrity and quality of Indian institutions, and growth story and ambition of India,” in the response it released over the weekend.

The group’s chief financial officer Jugeshinder Singh said in an interview with CNBC-TV18, an affiliate of CNBC, that the value of Adani Enterprises has not changed “simply because” of share price volatility, adding it instead lies in its “ability to incubate new businesses.”

He added that he is confident Adani Enterprises‘ follow-on public offering will be fully subscribed, calling Hindenburg’s report “simply a lie” and the timing of the report “malicious.”

Hindenburg on Monday morning described the group’s response “bloated” and claimed it “ignores every key allegation” against the conglomerate that it raised.

“Fraud cannot be obfuscated by nationalism of a bloated response that ignores every key allegation we raised,” the short seller titled its response to Adani Group.

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