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Visa Follows MasterCard in Joining NPCS

27.01.2015 12:00 / vedomosti.ru

Visa and National Payment Card System (NPCS) have distributed an announcement to market participants, stating that Visa has partnered with NPCS in domestic Russian transaction processing, two bankers told Vedomosti. The announcement has been circulated, confirm Central Bank, NPCS and Visa sources.

Recently NPCS member banks have sent in a lot of queries, therefore Visa ans NPCS sent out a joint reminder of the statutory deadline for joining NPCS, comments a Visa rep, adding on a side note that the contract has not been signed yet. “The contract is going through approvals”, says a CB source.

According to the National Payment System Act, all international payment systems (IPS) must transfer domestic card transaction processing to NPCS by 31 March, otherwise they will have to place an insurance deposit with the CB — 25% annual daily card turnover as of last quarter. So far, the CB has announced only one agreement signing, with MasterCard. Visa, with their 61% Russian market share, has until now only stated that it “continues to cooperate with the CB and NPCS, in order to work out a mutually beneficial solution ASAP”.

Now the signing, in case it has not happened already, is imminent, insists the banker. Visa will switch to NPCS, it’s a done deal, assures a Top 10 bank source: the reasoning behind this is banks are currently installing hardware for sending both MasterCard and Visa card processing data to NPCS. “The probability of Visa backpedalling on the NPCS deal is close to zero”, says Head of Card Department at Otkrytie Yuri Bozhor.

Visa, unlike MasterCard, was in no hurry to sign with NPCS. Last September, Visa signed a memorandum with Sberbank-controlled Universal Electronic Card (UEC), which included the transfer of all Russian domestic traffic to UEC. The plan was jeopardized by amendments to the National Payment System Act, leaving international payment systems with a tough choice: either NPCS or deposit. Despite this, Visa kept talking to Sberbank until end-December, and Sberbank offered to take care of the deposit for Visa. However, the deposit could immediately have been used to cover the disconnection of SMP Bank and Russia Bank from Visa — the CB can charge up to 10 per cent of the deposit for every day of service suspension.

UEC is no longer in negotiations with Visa, says a source close to UEC. This has been confirmed by a source close to one of the IPSs.

Signing with NPCS also means a switch of settlement bank to the Central Bank, serving NPCS. Visa currently settles through VTB, and MasterCard used Sberbank. VTB continues to provide settlement services as per contract signed with Visa, says VTB.

“We try to set the fee at a mark that would not prompt payment systems to raise their fees for banks”, NPCS General Director Vladimir Komlev told Vedomosti.

Shortly after signing with NPCS, MasterCard distributed a new fee schedule to client banks. For instance, from 1 April onwards, the cost of international processing for Russian issuer banks will double, and triple for acquirer banks. Domestic Russian transactions, however, will cost less. “The structure of our income will remain unchanged, but a new source of expenses will appear. We cannot disclose the expenses, this is commercially sensitive info, but our financial model is unaffected and Russia remains an important and profitable market”, General Director of MasterCard Russia Ilya Ryabyi said as quoted by TASS.

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