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Industry roundup: 07 March

Russian banks are converting to the Chinese card system pursuant to Visa’s, Mastercard’s and soon AMEX’s shut downs in Russia

Several Russian banks publicized on Sunday their plans to begin issuing cards through China's card operator system with Russia's Mir network after Visa and Mastercard withdrew from Russia. According to Reuters, Sberbank, Alfa Bank and Tinkoff stated they will begin to use the Chinese UnionPay system. This statement was made the day after Mastercard announced that cards issued by Russian banks will no longer be supported by its network, and any Mastercard issued abroad will not work in Russian shops and ATMs. Visa also announced that it is working to suspend all transactions within a few days, after Russia's invasion of Ukraine began more than a week ago.

According to US Congressman Brad Sherman (CA), the announcements were released almost simultaneously, U.S. lawmakers were urged by the Ukrainian President to terminate Mastercard and Visa for Russia. According to the Associated Press, Russia accounted for 4% of Visa's net sales in 2021, and business conducted into and out of Russia also accounted for 4% of Mastercard's net sales in 2021.

Additionally, American Express Co., along with PayPal Holdings Inc., announced on Sunday they will shut down all operations in Russia and Belarus and join more Western companies to boycott businesses in Russia and Belarus over Moscow's invasion of Ukraine. American Express commented that its globally issued cards will no longer work at Russian merchants and ATMs. In addition, cards issued by Russian banks in Russia will no longer work abroad on the American Express network. Furthermore, AMEX also commented that it has already suspended relations with Russian banks that have been hit by US and international sanctions.

Intense global economic impact from war in Ukraine according to IMF

The International Monetary Fund (IMF) stated on Saturday that it plans to submit Ukrainian’s request for emergency funding of US $ 1.4 billion to the board this week for approval and is currently discussing funding options with adjacent Moldova authorities (Ukraine also has $2.2 billion available through June 2022 under an existing stand-by arrangement, according to IMF). Global lenders stated the war in Ukraine had already pushed up energy and grain prices, releasing unprecedented sanctions on Russia and sending a wave of more than a million refugees to adjacent countries.

Kristalina Georgieva, Managing Director, IMF, commented that the situation remains very volatile, and the outlook is very uncertain, but the economic downturn is already severe. Additionally, the reports stated that the ongoing war and the associated sanctions would also have a serious impact on the global economy, noting that the crisis was creating a negative impact on inflation and economic activity when price pressures were already high. Price increases are felt around the world, and authorities are encouraged to provide financial support to underprivileged households where food and fuel make up a higher proportion of expenses. Economic damage is expected to continue to increase as the war intensifies. Drastic sanctions imposed on Russia by the United States, Europe and others would also have a significant impact on the world economy and financial markets.

In addition to casualties, Ukraine has suffered serious economic damage, as ports and airports were closed and damaged, and many roads and bridges were damaged or destroyed. According to the report, it is very difficult to accurately assess the financial needs at this stage, but it is evident that Ukraine will face considerable recovery and reconstruction costs. Additionally, the IMF staff states that they are actively discussing funding options with Moldova, which is requesting an increase and rebalancing of its existing $ 558 million IMF lending program to cover the costs of the current crisis.

CBDC 2nd phase pilot planned for Taiwan by third quarter 2022

Digital banking is moving at a fast pace globally. The Central Bank of Taiwan (CBT) accelerated its research into the development of its central bank digital currency (CBDC) and plans to complete the second phase of the pilot program by September 2022. According to the CBT, a CBDC feasibility study was completed in June 2020, and the current focus is on the technical aspects of the project, such as building a prototype CBDC platform and simulating its use in retail payments.

The CBT stated the development of the new Taiwan dollar is modelled using a two-tier retail model that should coexist with Taiwan's current banking and financial system, but it has not been confirmed whether they plan to officially launch the CBDC after completing a successful pilot. According to local reports, the CBT plans to enable the public to choose to open a digital currency wallet with their bank and exchange their deposits at a 1:1 rate once the new digital Taiwan dollar becomes available. Additionally, the CBT states that the CBDC can be used as cash anywhere through the mobile app, and customers can connect their credit or debit cards.

Digital payment solutions to reach the Middle East and North Africa

United Arab Emirates-based B2B SaaS provider FOO has partnered with card-issuing platform NymCard to provide digital payment solutions to innovators in the Middle East and North Africa (MENA). According to the press release, the collaboration plans to expand the region’s options by providing non-traditional financial institutions such as fintechs, digital banks, governments, telecoms, currency exchanges and retailers with end-to-end payment solutions to digitize their solutions and improve customer experience.

With friction associated with card issuance, the partnership commented that a single platform that includes a complete suite of APIs will eliminate this issue with the technical infrastructure that enables innovators to create, launch and scale card programs over multiple markets and regions.

According to FOO, innovators should be able to create their experience using any of its modular software solutions (including digital onboarding, prepaid accounts, virtual card issuance and management, international money transfers, NFC and QR code payments, peer-to-peer transfers and merchant solutions) and its white label app to go to market quickly.

With the rapid increase in digital payment adoption, innovators need access to tools to improve banking experiences and better serve the needs of today's businesses and consumers. Nabil Tabbara, VP of Strategic Partnerships, NymCard, commented that the partnership leverages the strengths of FOO and NymCard to meet the high demand for technology-savvy solutions in the region.

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