UnionPay and JCB to spearhead Asian payment push in Russia
While Russia is shifting a part of its business focus from Western countries to alternative partners, Asian bank card giants UnionPay and JCB have expanded initiatives to conquer the Russian market.
China’s UnionPay, which entered the market in 2007, claims to be accepted by over 100,000 POS terminals and more than 30,000 ATMs in Russia, and that a total of 45,000 UnionPay cards have been issued in Russia.
An early partner of the Chinese company, Russia’s MTS Bank has already issued 40,000 UnionPay gold crown cards since the two companies inked a partnership agreement in 2011.
MTS Bank intends to promote further its partner’s card business across Russia by issuing UnionPay debit and credit cards. This cooperation especially concerns cardholders engaging in cross-border trade in Russia’s Far East, according to UnionPay.
Furthermore, the Chinese company announced recently the issuance of its first Russian premium credit card as part of a partnership with Vostochny Express (Orient Express), a major Russian bank. According to the agreement, which was announced last month, Vostochny will issue no fewer than 1 million UnionPay cards.
The UnionPay premium credit cards will primarily target businessmen engaging in border trade in the Far East and the increasingly affluent middle class in this region. It will be accepted by the UnionPay global card acceptance network.
Among UnionPay’s other Russian partners are 30 banks in total, reported Germany’s Handelsblatt. According to various media reports, these include Gazprombank, Interprogressbank, Lightbank, MDM Bank, Moscow Bank, the Moscow Bank for Reconstruction and Development, Russkiy Standard, Svyaznoy Bank, Uniastrumbank, VTB, and others.
The Chinese bank card processing company thus appears as a threatening competitor to Visa and MasterCard, whose leading position on the Russian market is being undermined by new regulations rolled out by the Russian government in response to Western sanctions. The outcome of ongoing discussions between the two US firms and the Russian authorities is still unknown.
Meanwhile, UnionPay’s scope of interest in Russia goes beyond issuing bank cards. In late June, UnionPay Chairman Su Ning met with the Central Bank of Russia Vice President Dmitry Skobelkin, who co-headed the 15th meeting of the China-Russia Financial Cooperation Sub-Committee in Shanghai, to discuss a wide range of topics.
At this same meeting, UnionPay International CEO Cai Jianbo inked a deal with World without Borders, a Russian industry association aimed at developing touristic inflows from Asian countries. The association will “proactively facilitate UnionPay card acceptance and publicity locally to better serve tourists travelling between the two countries,” UnionPay stated.
Worthy of note is also the fact that UnionPay received a payment operator license from Russia’s central bank in September of last year. This status allows the company to conduct a range of operations in the field of electronic payments.
However, Victor Dostov, president of the Electronic Money industry association, has a nuanced opinion on UnionPay’s perspectives in Russia: “I see some big niches for them. For example, payments at Chinese Internet stores and auction houses, which are getting traction for different product categories in Russia. However, I doubt that UnionPay can be considered, from a Russian standpoint, as a more ‘patriotic’ choice than Visa and MasterCard. UnionPay is much more dependent on the Chinese government than Visa and MasterCard are on the US government and, definitely, in any conflict of interest UnionPay will pursue Chinese interests first,” the expert said in an exchange with East-West Digital News.
Japan’s JCB in the running
JCB is starting out from a very low base in Russia, well behind the likes of Visa, MasterCard and even UnionPay. However, the company’s large resources and global experience in emerging markets should aid its expansion plans. The decision to come to Russia was made by the company’s shareholders in 2013 – before the Visa/MasterCard debacle.
JCB’s first step in Russia was made through an agreement with Alfa Bank, Russia’s largest private commercial bank, in May 2014. The first stage of cooperation between the two companies will be the targeting of Russian passengers who fly to South Korea, Japan and China, where payment systems MasterCard and Visa are poorly represented.
In August 2014, the Japanese firm further entrenched its position by penning a deal with Moscow Credit Bank (MCB), which will offer JCB bank cards domestically and integrate the payment system into its ATMs.