What is UnionPay? China’s alternative to Visa and Mastercard is a controversial new lifeline for Russians as Western sanctions bite

Russian banks and companies are quickly finding Chinese alternatives to counteract Western sanctions and the exit of Western firms.

After Russian forces invaded Ukraine on Feb. 24, Western countries launched a salvo of unprecedented sanctions against Russia, including cutting Russia off from international payments system SWIFT and restricting the country’s access to its $630 billion trove of foreign exchange reserves. Western companies quickly followed suit with retailers and restaurants like Apple, Zara, IKEA and McDonald’s pulling out of the country.

Last week, U.S. payments giants Visa, Mastercard and American Express (AMEX) joined the list of companies dialing back service to local customers. Visa, Mastercard, and AMEX have now barred customers holding Russia-issued cards from transacting on foreign websites and abroad. Russians can still use Visa and Mastercard for payments within the country, but those who have globally-issued AMEX cards are blocked from using the cards even within Russia.

As big international companies pull out, Russians won’t be left completely in the cold. China’s UnionPay is emerging as a payments work-around for Russian citizens as sanctions bite, helping cement Russia’s shift away from Western-led systems and towards Chinese providers looking to expand their global footprint.


Launched by the Chinese government in 2002, Shanghai-headquartered UnionPay is a state-led financial services network that operates under the Chinese central bank called the People’s Bank of China (PBoC). The PBoC established UnionPay with the approval of China’s State Council, the highest-level government body that oversees all state functions and implementation of Chinese laws.

UnionPay offers debit cards, credit cards, and pre-paid cards, alongside services like cross-border remittance. The company’s cards are accepted in 180 countries including the U.S. and Canada, and European nations like the U.K. and Germany. UnionPay cards are issued in 70 countries, and the company has now issued more than 150 million cards globally. Visa is the dominant global card brand by transaction amount, according to 2020 numbers from The Nilson Report, a global payments research provider, but UnionPay is a close second with a 32% market share, thanks in large part to the purchasing power of Chinese citizens.

UnionPay is the reason why Chinese consumers “can swipe bank cards at point-of-sale machines, pay bills through online banking, [conduct] cross-bank withdrawals and transfers and use bank cards overseas,” says Chris Pereira, executive director at China-focused investment research firm EqualOcean. Chinese authorities launched the ‘Golden Card Project’ in 1993. It was the country’s first effort to build a national credit card network, and it paved the way for UnionPay’s launch nine years later, says Bruce Pang, head of macro and strategy research at China Renaissance Securities.

UnionPay didn’t immediately respond to a request for comment.

In the past week, UnionPay gained momentum in Russia, with banks hit by Western sanctions lining up to issue UnionPay cards that will be linked to Mir, Russia’s central bank-operated, homegrown payments system.

State-affiliated Sberbank, Russia’s largest lender by assets, is now exploring the option of issuing UnionPay cards, according to a Sunday report by Russian news agency TASS. Meanwhile Alfa-Bank JSC, Russia’s biggest non-state bank, is already working to “launch cards based on UnionPay,” it said. Tinkoff Bank confirmed to TASS that the lender is working on plans to offer UnionPay cards; a bank manager who declined to be named told Fortune the same.

Russian banks have turned to UnionPay to dodge the effect of sanctions before. Eight years ago when Russia annexed Crimea, Western countries sanctioned Russia to isolate the nation from the global economy. As a result, Russia’s third-largest bank Gazprombank began issuing UnionPay cards for its clients. Since then, a series of mid-sized lenders like Rosselkhozbank, Pochta Bank, Bank St. Petersburg, Promsvyazbank, Russian Regional Development Bank (VBRR), Primsotsbank, Zenit, and Sovcombank began operating under the UnionPay system. Last December, Russian Standard Bank—the country’s leading consumer lender—announced that bank customers could transfer money to UnionPay cards using the Chinese system’s cross-border money transfer service.

For Russians, the benefits of using UnionPay have become more distinct under the West’s new sanctions: those living inside the country can use UnionPay cards to make transactions on foreign websites, dulling the actions of Visa, Mastercard, and AMEX. Russian citizens living outside the country will be able to use UnionPay cards to make payments and withdraw money. UnionPay says its system spans 180 countries and is accepted by 55 million merchants worldwide. Meanwhile, 85% of ATMs and point-of-service terminals in Russia—around 700,000 units—support UnionPay cards, compared to 130,000 units back in 2014. UnionPay’s existing infrastructure across Russia, which is backed up by the “stability [of] a Chinese government dedicated to remaining neutral [in the Ukraine conflict],” makes the Chinese system a logical alternative for Russian banks and consumers, says Pereira.

Visa and Mastercard differentiate themselves by offering services like consulting on credit and risk issues and business process engineering for companies, says Brian Riley, director of credit advisory at Mercator Advisory Group, a consultancy focused on global payments. UnionPay doesn’t provide such expertise, but the Chinese system can process international payments and connect merchants and cardholders—services that Russia now urgently needs, says Riley.

UnionPay’s global presence is similar to AMEX’s position, says David Parker, CEO of Polymath Consulting, an advisory focused on the cards and payments industry. Unlike Visa and Mastercard, AMEX isn’t accepted everywhere worldwide, but “it’s accepted everywhere a businessman needs it to be. It’s much more of a business card,” says Parker. The “corner store may not take [UnionPay], but the majority of places that Chinese [and other] tourists [visit], will accept it,” he says. UnionPay is the main card that Chinese travelers use abroad, so many global merchants are set up to accept UnionPay cards so they can capitalize on outbound Chinese tourism, says Pang. Chinese travelers spent $255 billion overseas in 2019, account for 20% of all international tourism spending, according to the United Nations World Tourism Organization.

Already, UnionPay has come to the aid of Russians who were abroad when the Western sanctions hit and found themselves unable to withdraw cash from ATMs or use their credit cards. On March 10, a Russian embassy spokesperson in Indonesia—a popular destination for Russian tourists—announced that Russians in Indonesia could sign up—free of charge—for a virtual card distributed by Russia’s Pochta Bank that uses UnionPay.

Friendly support

China has the means to bail Russia out from Western sanctions, but Beijing will be conservative in doing so because it worries that helping Russia could invite secondary sanctions from the West, says Pang. China is “carefully managing” its financial support for Russia, and doesn’t want to give “Western countries any excuses for sanctions, bans or boycotts,” he says.

One risk for UnionPay is that becoming Russia’s safety net could jeopardize its relations with the West and UnionPay’s acceptance in North American and European markets, says Riley. While accepted in most countries, UnionPay gets most of its business from its home market in China; its “uptake beyond Asian markets is minimal,” says Riley. Since its inception, UnionPay has pursued international expansion. In early February, UnionPay inked a partnership with U.S. payments and fintech firm Fiserv to help accelerate UnionPay’s acceptance and issuance of UnionPay cards in global markets. But if UnionPay earns a reputation as the payments system Russia is using to skirt the effects of U.S. sanctions, it could hamper UnionPay’s ambitions elsewhere, Riley says.

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