US-based payment technology companies, Visa and MasterCard, should consider quitting Russian market in response to a new Russian law which mandates both companies to deposit at least $2.9bn to operate in the country, says new research by Morgan Stanley.
Morgan Stanley says that both firms are not in a position to provide hundreds of millions of dollars in security deposits.
Russian law requires Visa and MasterCard both to deposit at least $2.9bn to operate in the country, which is nearly fivefold more than the two companies’ combined annual revenue in Russia, as reported by Bloomberg.
As per the new legislation, the international payment systems will have to provide a security deposit in the Central Bank equal to the cumulative value of two days of transactions processed in Russia before 1 July 2014.
Russian Prime Minister Dmitry Medvedev urged the two companies to fulfill their responsibilities toward clients and stay in Russia.
"What Visa and MasterCard did was a direct violation of their contract with Russian clients, not banks, but individuals who trusted these payment systems," Medvedev told Bloomberg.
According to an estimate, MasterCard generated nearly 2% of its revenue from Russia, or about $167m in 2013, while Visa’s annual revenue stood at $471m last year, according to estimates from Morgan Stanley.