So far, the West’s reaction to Russia’s annexation of Crimea has been rather chivalrous. Freeze a few assets here, travel restrictions for a dozen people there, and of course have Visa and MasterCard stop providing services for a few Russian banks.

Putin then said Russia will explore launching its own credit cards, similar to Japan’s JCB and China’s UnionPay. Nice try. While these two companies have pretty good traction in their home market, they are dwarfed by American plastic.

According to research by Nilson, MasterCard processed more than $8 trillion of the world’s credit card transactions in 2011. Visa came second at around $3 trillion and UnionPay third with a little more than $2 trillion. The reason: MasterCard and Visa are accepted everywhere in the world, where the other two are pretty much local only.

Either way, banning a few Russian banks from processing Visa or Master for a while or Russia launching its own alternatives won’t change a lot in the grand scheme of things. However, the direction where this conflict is going is interesting.

The Nuclear Option
International payments between banks are processed via the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a little known member-owned cooperative based in Belgium.

If you have ever sent an international wire transfer, you will likely have entered a so-called Business Identifier Code, or BIC in short. It is part of SWIFT’s system for processing payments.

 

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