Mir payment system

The homegrown payments system is good news for the state, but will have unfortunate consequences for the private sector.

The stunning success of Russia’s Mir payment system has laid down a marker for many countries across the world. In a little over five years, Moscow has created an indigenous payment scheme over which it has full control. This makes it harder for adversaries to threaten the economy through sanctions, by cutting off Russian banks from using Visa and Mastercard payment schemes, for example. It also keeps 100% of the payments revenue pool in Russian hands, and the country’s lenders are prospering as a result. 

As Mir expands across central Asia and beyond, Russian banks are reaping the benefits of surging cross-border payments on the system. Although Mir is not unique – other domestic systems exist, including iDEAL in the Netherlands and the Mada card in Saudi Arabia – it shows what can be achieved in a short period of time with the full backing of the state. For jurisdictions that want to minimise the punitive impact of, particularly, Western sanctions, while boosting revenues in the domestic banking sector, Mir is a model to follow.

In a little over five years, Moscow has created an indigenous payment scheme over which it has full control

Yet there is also a wider lesson to learn from this experience: muscular state intervention, of the sort that birthed Mir, can be advantageous, but comes with heavy long-term costs. Russia may be able to rapidly build and deploy a payment system, but the level of state intervention required to do so is holding back the country in other ways. The ingredients that can turbocharge economic success, including individual liberty, a flourishing civil society and an independent judiciary, are being stifled by Moscow’s ruling elite. This is contributing to a failure to enact meaningful reforms, a problem that is shared in different ways with neighbouring China. 

As a result, Russia is paying the price when it comes to the dynamism of its private sector. Beyond the defence and space industries, the country should be doing better in terms of wider innovations across the economy. The true extent will not be felt for many years, and long after the current administration has moved on. Despite the success of Mir, Russia’s long-term prospects are harder to divine than ever.


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