February 26, 2022 will be remembered as a day that altered the geopolitics of cross-border payments and international finance. On this day, the US, the European Union (EU), the UK and allies agreed to disconnect key Russian banks from the global interbank messaging system, SWIFT or the "Society for Worldwide Interbank Financial Telecommunication", as a retaliatory measure against Russia for its invasion of Ukraine.

This was followed by Visa, Mastercard, American Express, PayPal and JCB (Japan’s premier payment brand) suspending operations in Russia, joining a growing list of international companies refusing to do business with Russia. This conflict also threw fintech companies into the heart of the global crisis and compelled them to react. This is how major fintech service providers reacted to the Russia-Ukraine war.

Google Pay and Apple Pay

Russian customers have been barred from using prominent digital wallets, Google Pay and Apple Pay. Last reported figures by Statista confirmed that 29% of Russians used Google Pay, while 20% used Apple Pay.

According to Statista, the value of cross-border money transfers made by Russians in 2020 were worth over US $40 billion. In 2022, however, this sum is likely to be much lower given that fintechs involved in global money transfer services are leaving the Russian market.

Revolut

British fintech firm Revolut, with an office in Ukraine, has blocked payments to Russia and Belarus. Revolut also waived transfer fees for sending money to a Ukrainian bank account.

Revolut’s co-founders chief executive officer Nik Storonsky and chief technology officer Vlad Yatsenko, who are Russian and Ukrainian respectively, have successfully collaborated to grow and lead one of Europe’s most valuable fintech startups with a valuation of $33 billion (£24 billion) at its last fundraise in July of 2021.

Wise (formerly TransferWise)

The London-based cross-border payments company ceased all money transfers to Russia. Wise has one of its oldest offices in Cherkasy, Ukraine, which has evolved to become the technological root of the company. Wise also waived fees for money transfers to Ukraine.

Western Union

Western Union, an American multinational financial services company and global leader in cross-border, cross-currency money movement and payments, pulled out of Russia due to the ongoing war in Ukraine.

Remitly

Remitly, a Seattle-based fintech, offers a mobile platform for sending money internationally, used heavily by immigrants and their families. It no longer supports money transfers to Russia.

MoneyGram

Russia’s invasion of Ukraine spurred a rush of remittances from citizens from both countries living abroad to help their families withstand war disruptions. US-based cross-border P2P or person-to-person payments company MoneyGram saw a 120% spike in money transfers to Ukraine on the day Russia attacked, while remittances to Russia shot up by more than 50% the week of the invasion, said CEO Alex Holmes. MoneyGram has removed all fees on transfers going to Ukraine from the US, Canada and the EU.

Paysera

Lithuanian fintech company Paysera’s transfers to Russian and Belarusian financial institutions have been halted if the recipient is a Russian or Belarusian company. In addition, Paysera closed accounts of its Russian clients in a show of solidarity with Ukraine. “The company’s restrictions on money transfer will also reduce operational risk for the company,” observed Gintautas Mežetis, CEO of Paysera.

Payoneer

New York-based fintech Payoneer, which specializes in cross-border payments, stopped money transfer services to Russia over its aggression against Ukraine. Payoneer has even assumed zero contribution from Ukraine, Russia and Belarus for the rest of 2022. The company said that Russia and Belarus combined represented approximately 3% of their revenue in 2021, and together with Ukraine accounted for less than 10% of last year’s revenue. Payoneer had projected these countries would generate approximately $46 million of revenue, which they are now excluding from their 2022 earnings guidance.

Coinbase

The US-based cryptocurrency exchange Coinbase has taken a stand against Russia and blocked 25,000 cryptocurrency addresses linked to Russian people or entities they believe have engaged in illicit activity.

Paul Grewal, Coinbase’s chief legal officer, wrote in a blog post that the company has also shared the addresses with the US government to help it with sanctions enforcement.

Binance

Binance, the world’s largest cryptocurrency exchange by trading volume, has blocked transactions with Mastercard and Visa cards issued in Russia.

The crypto giant, Binance, further noted that all transactions initiated with Mastercard and Visa cards issued by financial institutions outside of Russia will be unavailable on Binance within Russia, which is also in line with the policy changes announced by Mastercard and Visa. The restrictions apply only to Binance’s crypto-to-fiat service.

Kraken

Kraken, a US-based cryptocurrency exchange and bank founded in 2011, won’t shut down Russian accounts unless legally required.

Jesse Powell, Kraken’s co-founder and CEO, believes the exchange is within the legal sanctions requirements but that indiscriminate bans are unfair to average Russians, who might not support the country’s invasion of Ukraine.

Mintos

Europe’s biggest lending marketplace, Mintos, (a global P2P lending platform) has decided to exclude all loans from Russia and Ukraine from its main market to protect investors from the potential financial fallout of the conflict, according to AltFi.

Mintos has also paused currency exchanges to and from the Russian ruble for all currencies, and it is actively monitoring ruble currency developments on a daily basis.

Digital currency and remittances in the spotlight

Ukraine has legalised the crypto sector that creates a legal framework for the cryptocurrency industry in the country. This will allow foreign and Ukrainian cryptocurrency exchanges to operate legally, and banks will be allowed to open accounts for crypto companies, according to the country’s Ministry of Digital Transformation.

It appears that Ukraine is the first government in wartime to accept cryptocurrency donations. As per the blockchain analytics firm Elliptic, Ukraine has raised $63 million so far in cryptocurrency donations to be used to spruce up its military defence and humanitarian efforts.

Last year, Ukrainian President Volodymyr Zelensky signed into law a bill that enabled the National Bank of Ukraine, the country's central bank, to issue its own central bank digital currency (CBDC). The CEO of Stellar, Denelle Dixon, has said that her company is working with Ukraine to develop the digital hryvnia (CBDC) despite its ongoing war with Russia. This is in consonance with the Ukrainian president’s plan to transition into a “cashless society” in 2022.

According to World Bank data, last year, Ukraine received more than $16 billion in remittances, while Russia got $10 billion. Most of the money comes from the EU or the US. Prior to the war, remittances made up 9% of Ukraine’s gross domestic product (GDP) and 0.6% of Russia’s GDP. However, as the Russian economy gets battered by the Western sanctions, remittances are expected to become more contentious and important.

Conclusion

The unprecedented and expansive sanctions imposed by the West, including unplugging Russia from SWIFT, have dealt a severe blow to the Russian economy, but there will be collateral damage for financial institutions and fintech companies, particularly in European countries.

Many fintech service providers have cut ties with Russia out of their own volition. They weren’t obliged by law or pressured by financial sanctions to do so. This decision by fintech companies to reduce financial activity, prevent usage of their products and services and distance themselves from Russia may affect their revenues and profits, yet it exhibits their willingness to look beyond financial gains. From their perspective, staying away from Russia may not just be a reaction about adeptly managing operational and reputational risk, but may also be a moral and political response.