Alive and Kicking. That is how the India-Russia bond in the 21st century can be defined. Though it is not that bad in case of Russia, still it is worthwhile to note that India runs a huge trade deficit with Russia. Things can be changed and Russia graduating to UPI and RuPay may turn out to be a game changer.
Russia requesting India to use MIR
According to reports in the public domain, Russia wants India to use its made-in-Russia MIR payment system. Alexander Pankin, Deputy Foreign minister of Russia is said to be taking charge from the Russian side on the negotiation table. Apart from India, other countries namely Azerbaijan, Bahrain, Egypt, China, Cuba, Myanmar, Nigeria and Thailand are also on the Russian chart for the introduction of MIR.
Flash: Russian Deputy Foreign minister Alexander Pankin says Moscow negotiating with India for use of its Mir payment system.
— Sidhant Sibal (@sidhant) August 20, 2022
Pankin termed US Dollar and Euro as toxic currencies and emphasised that trades should primarily be done in national currencies. Pinning the blame on sanctions for their emphasis on MIR, Pankin said, “The unreasonable blocking of all Russian customers by the largest international card payment systems has increased the priority of expanding the geography of using Mir cards. We are actively working on it,…” (sic)
Russia’s need for pushing MIR
Ever since the sanctions regime kicked off, Russia has been looking to eliminate the need for western banking institutions. It has worked actively towards pushing its own System for Transfer of Financial Messages in the international market. To Russia’s credit, they have largely been able to benefit from hundreds of banks spread in various countries.
But, avoiding negative effects of SWIFT sanctions and pushing MIR are two different phenomena. MIR is Russia’s alternative for VISA and Mastercard, though it does not issue cards itself. MIR provides financial institutions with Mir-branded payment products which are further used to offer credit, debit, or other programs to their customers. In other words, if a Russian Bank uses the brand name MIR with its products, then it becomes more reliable for its customers.
MIR’s success story
Though, it is also true that practically, MIR is more known for its name attached to payment cards. As a result of American cards exiting from Russia, it has the potential to occupy the remaining 70 per cent of the Russian Card market. In value terms, MIR Cards can earn revenues as big as $2 billion.
Its Quarterly adaptation growth shows that it is well on its track. Moreover, apart from the aforementioned countries in talks for joining MIR, 11 countries have already joined it. These countries include Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Uzbekistan, Venezuela, Vietnam, and Cuba among others.
But, India has RuPay
But, there are big problems with pushing it in India. In spite of its growth, its Cards’ market share stands nowhere compared to Indian RuPay. While, by the end of this year, MIR Cards may be accepted in more than 30 countries, RuPay is accepted in 42.4 million POS locations and 1.90 million ATMs in more than 200 countries.
It makes much more sense to push for more use of RuPay in Russia and it has expressed its interests in the past. Additionally, one more fact which goes in favour of RuPay is that it has established a supply chain. MIR Cards do not have such a big infrastructure to cater to every Russian citizen. When its demand spiked earlier this year, Russians started to face a shortage of chips. No such problem has been reported with RuPay infrastructure till now and it can easily provide cards to more than 10 crore Russians.
UPI needs to be pushed in Russia
Moreover, the linkage of RuPay cards with the Unified Payment System (UPI) is also underway. To say the least, UPI is colossal. It is the biggest payment interface in the world. In May this year, UPI was used to transact 10 trillion Rupees. Currently, it is being used in countries including the UK, France, UAE, Singapore, Nepal, Malaysia and Bhutan among others. There is a high possibility that Australia and Russia will soon integrate UPI into their national payment infrastructure.
Numbers are tilted in favour of products of India’s own Financial system. It is true that Russia needs assistance, but not at the cost of Indian products and bilateral ties should be a win-win for both countries.
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