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  • Thierry Spanjaard

Fragmented payment world

The ongoing war in Ukraine is at first a human drama for its Ukrainian and Russian victims, let's not forget about them while most of us are comfortably sitting at our desks commenting events and working in the secure transactions industry. At the same time, the latest developments are probably the sign of a turning point in the world as we used to know it.

Thanks to decades of intensive standardization work, partnerships, mergers and acquisitions, a cardholder with a Visa or MasterCard card was, until the beginning of this year, pretty sure he could access his funds everywhere on the globe. Of course, local solutions are already abundant, such as in China, in India, or in some countries in Eastern Africa, but all, or almost all, players had some sort of agreement with the two leading payment schemes to guarantee acceptance and interoperability.

Visa and Mastercard are far from being the only payment schemes. In the US-led western world, American Express and Discover are their most visible contenders. In China, UnionPay, previously known as China UnionPay) is the leading payment scheme. According to the Nilson Report, UnionPay accounted in 2020 for more than a third of the cards in circulation worldwide, while Visa and MasterCard combined represented only a quarter. Chinese payment landscape is not complete without QR-code technology leaders Alipay and WeChat. In other geographies, many countries have setup national systems, such as Mir in Russia or RuPay in India.

The ongoing set of sanctions against Russian government and economy leads many to reconsider their dependence upon other countries. One of the first announced sanctions was to cut off Russian banks from Switch, the main international interbank payment system. Also, Russia-issued Mastercard and Visa cards are no longer recognized by POS terminals in a number of countries.

Consequently, Russia has to turn to another international player: UnionPay. Already, Sberbank, the largest Russian financial institution announced it would issue cards with two payment schemes logos: those of Mir and UnionPay. Alfa-Bank, Tinkoff Bank and others are expected to follow suit.

So are we going into a totally fragmented payment world where UnionPay on one side and Visa and Mastercard on the other side will dominate the payment landscape but remain incompatible with each other, and where entities like Mir or RuPay will have to remain in the second tier?

And if Europeans anticipated the emergence of a European payment system to support European sovereignty, they can already forget the idea as EPI, the European Payments Initiative, announced earlier today it has given up on its effort to build a rival to Mastercard and Visa in Europe after more than half its members left. EPI will join the already populated cemetery of European payment projects that never materialize, and European sovereignty will have made a step backward.

Photo credits: Photo by Erik Eastman on Unsplash - Photo by Thiago Matos from Pexels

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