money crosses borders without fanfare

In the new reality of the Russian economy in general and the financial system in particular, basic concepts have been turned upside down. For example, that good news should be told and bad news hidden. Now they report on successes in a whisper, or even remain silent, so as not to attract unnecessary attention and not break what was worked with difficulty, as often happened in 2022 due to inexperience. So improvements in the organization of cross-border financial flows look subtle. But they exist.

Everything is very bad, and everyone knows it. For the second year now, Russian citizens have not been able to use cards of the international payment systems Visa and MasterCard abroad issued in the country. The expansion of the circle of sanctioned banks also closes the possibilities of Chinese UnionPay cards. Direct pressure from American and European authorities on banks in the CIS countries and Turkey has reduced the possibility of making payments with Mir cards. And the threats of secondary sanctions and the shutdown of the SWIFT financial information transmission system do not at all increase the number of people willing to work with Russian financial institutions.

However, 2023 showed that financial ties, although not quickly, are being established. So, in March in Cuba, ATMs started issue local pesos using the Mir card, and in November it became possible to pay with it in stores. In October, the Chairman of the Central Bank of Venezuela, Calixto Jose Ortega Sanchez, stated that Mir cards can already be used throughout the country. A little later, Venezuelan Foreign Minister Ivan Gil Pinto said that they were accepted in 36% of retail outlets. In November, reports appeared about the acceptance of Mir cards by a number of Laotian banks in test mode.

Moreover, there are many countries where you can pay with a Mir card or withdraw money from an ATM, although local banks and payment systems prefer not to talk about this.

Thus, according to Pochta Bank, over 11 months the volume of payments made by its clients abroad using the Mir card was 1.5 times higher than last year’s figure, reaching 1.3 billion rubles. It is unlikely that all this money was spent in Cuba and Venezuela. Just the other day, Dushanbe City Bank began issuing co-branded cards of the national payment system “Korti Milli” and “Mir”. According to the head of the NSPK, Vladimir Komlev, almost all foreign partners with whom interaction was established, but then operations stopped under pressure from Western regulators, maintain the system in working order and regularly carry out updates issued by the NSPK: “They are waiting for the go-ahead. And as soon as it becomes possible, they will be ready to resume accepting cards.”

In a number of countries, mainly tourist ones, such as Turkey, Egypt or Tunisia, local merchants install POS terminals of Russian banks or payment companies, which allow you to pay not only through the Mir system, but also with any cards issued in the Russian Federation, and even through SBP. In this case, the payment is made as a domestic payment, and the seller is then transferred to his account in a local bank in national currency.

You can simply transfer money through SBP to a store employee’s card: Eastern entrepreneurs are ready to open cards in Russian banks or hire Russians, just so as not to miss out on profits.

The situation is even better for transfers abroad. According to Vladimir Komlev, SBP has established cooperation with the Belarusian instant payment system (IPS), and negotiations are underway with similar transfer systems in other countries. In addition, banks directly negotiate transfers with foreign colleagues through correspondent accounts in national currencies. Thus, the completely sanctioned Sberbank and VTB are ready to transfer money to two dozen countries, Tinkoff Bank – to almost four dozen. And these lists are growing. In December, Tinkoff Bank clients were able to transfer funds to Brazil. Post Bank launched transfers to South Korea in November.

As VTB calculated, by the end of the year its retail clients will make a total of more than 330 thousand international transfers amounting to over 40 billion rubles, which is four times the result of 2022. In 2024, the bank is confident that the volume of cross-border transfers from its clients will exceed 200 billion rubles.

The expansion of correspondent relations with Chinese banks has led to an increase in settlements in national currencies – rubles and yuan.

According to the Central Bank, in October the share of the yuan in the structure of export volumes reached 33%, exceeding the combined share of the dollar and euro (24%). The situation is similar in the import structure – 37% versus 28%. Large Russian banks – Sberbank, VTB, Alfa Bank – are expanding their branch networks in China and India. At the end of 2022, 106 non-residents were connected to the Financial Message Transmission System (SPFS, an analogue of the SWIFT system), and by October 2023 their number increased to 150 organizations from 16 countries. One of the few areas in which real progress is not visible even in a whisper is the digital ruble, which has been predicted to be the future of cross-border currency.

If last year was a time of big promises in terms of cross-border finance, then 2023 is a time of quiet action. But silence turned out to be expensive—commissions for such transactions are high. There are also enough problems and new risks.

For example, on New Year’s Eve, US President Joe Biden signed a decree allowing the introduction of secondary sanctions against foreign banks for assistance in areas primarily related to supporting and ensuring the Russian defense industry. Such financial organizations may be prohibited from opening or imposed strict conditions on maintaining correspondent accounts in the United States, as well as block all property. This is a serious threat that can cool the willingness of foreign partners to even quietly cooperate and further increase its cost.

Maxim Builov