Visa and Mastercard improved financial performance in the Russian Federation

In 2023, Russian subsidiaries of the international payment systems Visa and Mastercard significantly improved their financial results, despite the cessation of their main activities in the country. The reason is a radical reduction in expenses and revaluation of foreign currency assets.

According to RAS reporting for 2023, the subsidiaries of the international payment systems Visa and Mastercard, Visa LLC and Mastercard LLC, their financial results have improved significantly year on year.

In particular, Mastercard received a net profit of 5.3 billion rubles, while a year earlier it suffered a loss of 1.9 billion rubles.

Visa reduced its loss by almost six times – from 120.7 million to 20.8 million rubles. Such results were achieved by companies that have not conducted core activities in Russia for more than a year.

As noted in the explanations to Mastercard’s balance sheet, in March 2022 the company “was excluded by the Bank of Russia from the register of payment system operators, lost the right to provide and stopped providing clearing services within the payment system.” Also, the company has been providing encryption services since 2019, which it froze as of December 1, 2022. From January 1, 2023, Mastercard ceased providing consulting and marketing services. Visa also has not provided payment infrastructure services since March 2022, and since October 2022 – in the field of consulting, marketing, operational and technical support.

The companies managed to improve their financial results thanks to a noticeable reduction in expenses and a positive revaluation of foreign currency assets.

For example, Mastercard’s general business expenses (including labor costs) decreased by 5.5 times, to 240 million rubles. Visa reduced management and other expenses by 4.6 times, to 337 million rubles.

At the same time, Mastercard’s income from the currency revaluation of assets decreased slightly – from 11.2 billion in 2022 to 9.1 billion rubles. in 2023, while expenses from currency revaluation decreased significantly – from 13.7 billion to 2.5 billion rubles. At Visa, income from currency revaluation in 2023 exceeded expenses by almost 200 million rubles, while in 2022 these figures were almost the same.

Despite the suspension of their main activities, companies are not yet planning to close.

Mastercard’s reporting acknowledges that sanctions against Russian organizations may “negatively affect market participants’ perceptions of the company’s activities.” However, “at the end of 2023, the parent organization did not make a decision” to liquidate or surrender the license of the Russian structure, Mastercard said in its explanatory note. Visa only notes that the company’s management “has no plans for future actions to resume operating activities.” There are no plans to close the company.

Experts attribute this approach to the difficulties of exiting the Russian market. The head of the Financial Technologies Association, Roman Prokhorov, believes that the local divisions of Visa and Mastercard “possess assets that in the current conditions cannot be sold and withdrawn without significant losses.” An independent expert in the payment card market, Dmitry Vishnyakov, adds that closing legal entities today is “too expensive in terms of resources and risks associated with mandatory regulatory checks.” “For many foreign companies, it is easier to leave the legal entity in hibernation mode,” he believes.

Domestic banks are also loyal to Russian subsidiaries of foreign payment systems, preferring to sue their parent organizations. According to Timur Khalishkhov, a lawyer at the NSP law office, potential claims against international payment systems could involve damages for refusal to service bank cards issued by Russian banks abroad, since the latter clearly missed certain amounts of revenue. The prospects for success of claims against Russian subsidiaries are low, “since proving losses requires confirming negative actions that resulted in financial losses on the part of the potential tortfeasor,” explains the lawyer. According to him, in this case, “it was the parent companies who acted as the will-makers to introduce restrictions against the Russian banking system,” that is, the actions of their Russian subsidiaries “do not constitute an offense.”

Maxim Builov