Why the News From Russia About Visa Inc. and MasterCard Inc. Matters to Investors

After months of concern, the fears surrounding how Visa and MasterCard will operate in Russia in the coming years came to a remarkable conclusion on Friday.

May 24, 2014 at 1:25PM

Moscow By Greg Westfall
Moscow. Source: Flickr / Greg Westfall.

Most of the news from Russia in recent months has been a cause for concern for Visa (NYSE:V) and MasterCard (NYSE:MA) -- but the news announced Friday means big things for these two giants in the payments industry.

The troubling trend
As the conflict in Russia and Ukraine heated up, the U.S. government called for sanctions across a variety of industries. Two majorly affected companies in the financial space were Visa and MasterCard. Bloomberg reported in March that Russian-based Bank Rossiya -- which was targeted by the U.S. in sanctions -- noted its cards were no longer serviced by MasterCard and Visa "without any warning." 


Just days later the actions intensified as Businessweek reported with Visa and MasterCard stopping the processing of certain transactions in Russia, the head of the largest bank in the country said Moscow could launch its own homegrown payment system within six months in an effort to retaliate.

In addition, the Russian parliament introduced legislation that wouldn't allow for any payment systems based outside of the country itself. Businessweek suggested Russia was preparing "for life without Visa and MasterCard."

But the conflict reached its height the first week of May when Vladimir Putin himself signed a law that required Visa and MasterCard to pay a staggering $3.8 billion security deposit to the Russian government if they wanted to continue operations in the country. 

All of this led to the CEO of MasterCard, Ajay Banga, saying on the latest earnings call:

There are provisions (in the legislation) there that I believe would create serious complications for the way that we can operate in (Russia). Russia will be tough to work through. 

The sigh of relief
Yet this began to change this week as the finance minister in Russia, Anton Siluanov, suggested he confidently felt a "reasonable solution" would be reached with Visa and MasterCard. He said the reason behind this was simple: "We can't quit using these systems, as more than 90% of customers use them." 

Rubles And Cents By William Neuheisel

Rubles and Cents. Flickr / William Neuheisel.

But the biggest story came today, as news broke Russia had come to an agreement with Visa and MasterCard to allow the payment companies to continue their operations in Russia. Visa's general director for Russia, Andrew Torre, said simply, "MasterCard and Visa will continue business in Russia."

And the aforementioned Russian Finance Minister Anton Siluanov said MasterCard and Visa "are ready to work within the framework of the new law, and we are ready to cooperate with them and will find a solution." 

What it means to investors
There are two critical takeaways for investors as a result of the reached agreement between the firms in the payments industry and the Russian government.

First, it's nice to know Visa and MasterCard will hold onto the $3.8 billion that would've undoubtedly hit their profits beginning July 1. But it's also critical to see while just 39% of the $8.4 billion in revenue at MasterCard was generated in United States, only 2% of its revenue came from Russia, so even the suspending of operations there wouldn't have been devastating.

But secondly, and more importantly, it must be noted it isn't every day when two businesses are able to reach agreements with the Russian government which serve their best interests and not that of the government.

As a result, even with all the speculation surrounding the future of payments industry, this is one more example of the staggering power Visa and MasterCard have not only in the U.S. but across the world.

The one thing that keeps them up at night
While the concern from the Russian conflict is over for Visa and MasterCard, there is one thing still on their minds. It's the reality the plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Patrick Morris has no position in any stocks mentioned. The Motley Fool recommends MasterCard and Visa. The Motley Fool owns shares of MasterCard and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers