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How Russian sanctions affect Visa

Dean Arrindell
Hot Stock Minute

While Visa (V) beat second quarter earnings and revenue estimates, the world’s-largest credit and debit company said it was having some difficulties internationally. Visa lowered its revenue outlook for the year because of a slow-down in cross-border transactions and a stronger U.S. dollar. The company is also affected by the conflict between Russia and Ukraine.

A new Russian law is forcing Visa and rival MasterCard (MA) to deposit nearly $3 billion in collateral in Russian banks to operate there. Visa considered pulling out of Russia, but officials there said the companies could avoid paying the collateral if they find local partners by the end of October. Transactions in Russia make up about 2% of Visa’s revenue.

Yahoo Finance Senior Columnist Michael Santoli said some of the first industries that U.S. sanctions affected were companies dealing wtih money transfers and Russian banks. Since Visa was one of the few companies already on the ground in the country, it is one of the few areas where Russia can exert some influence.

While Russia may have a little leverage, Yahoo Finance’s Jeff Macke doesn’t think Visa’s problems in Russia will have a huge impact on the company. “It’s kind of a rounding error in terms of what’s going on with Visa,” he said. “If given the choice between investing in Russian banks right now, or just bailing on the entire operation, I’d probably take the latter if I’m Visa.”

Santoli agreed about the minimal impact to Visa, saying that the situation in Russia could be a nuisance to companies, “but [Putin] needs the rest of the world more the rest of the world needs the Russian banks at the moment.”