As Europe’s proposed alternative to Visa and Mastercard takes shape, evidence from Russia suggests that an upstart rival may shatter the duopoly of the US giants – if the government is willing to put its finger on the scales.
The European Central Bank has long launched the idea of a local cross-border system capable of accepting Visa and Mastercard.
Last year, many banks on the continent finally unveiled their intention to act through the European Payments Initiative (EPI), which promises a unified pan-European payment system, offering a card to consumers and merchants alike. all over Europe, a digital wallet and P2P payments. .
While the task of gnawing away at Visa and Mastercard dominance is daunting, figures from Russia show it is possible.
Russia set up the national Mir payment card network in late 2015 at the behest of President Vladimir Putin in response to US and European sanctions over the annexation of Crimea, which saw MasterCard and Visa cut services to several banks from the country.
According to GlobalData, in 2020, 74.6 million debit cards were issued by Mir, which represents 28.62% of all debit cards in circulation. Mir’s market share is now 25.3% in transaction value.
However, this required heavy state intervention of the kind that Europe seems unlikely to follow.
The Russian government has passed mandates requiring public sector employees receiving state funds and social benefits to migrate to Mir payment cards. A similar mandate was imposed on retirees.
Meanwhile, merchants whose annual transaction turnover exceeds 40 million rubles ($ 0.5 million) are required to accept Mir cards. The threshold was reduced to 30 million rubles in March and will drop to 20 million rubles in July.
Chris Dinga, Payments Analyst, GlobalData, says, “Governments can introduce payments systems and support the domestic transaction landscape by driving adoption through mandates and regulations. Indeed, this could be the model that the European Commission will follow when it launches its own payment system “.