International payment systems Visa and MasterCard must find a local partner to avoid paying the huge security deposit and continue doing business in Russia, said an official statement from the government.
A decree signed by Russian Prime Minister Dmitry Medvedev on July 15 said the companies must find a Russian payment system deemed "of national importance" to process their transactions by Oct. 31.
Early this year in March, Visa and MasterCard abruptly terminated service to two Russian banks to comply with sanctions imposed by US against Russia following its annexation of Crimea.
In response to that, Russian parliament introduced legislation in April, demanding the credit companies make a hefty security deposit to the central bank to continue doing business in country. Morgan Stanley analysts at the time estimated that the joint deposit for Visa and MasterCard could amount to $2.9bn, which is five times more than their annual revenues in Russia.
Russian President Vladimir Putin also signed a law in May that laid the groundwork for the creation of a national payment system to replace foreign players.
But the legislation is a far cry from the ground reality. Visa and MasterCard together process about 90% of transactions in Russia, and creating a national payment system was a herculean task.
To resolve the standoff between payment providers and the government, Russian Central Bank chief Elvira Nabiullina proposed the solution of a local partner at a banking conference earlier this month.
MasterCard already started search for a Russian partner a month back to circumvent the law, as reported by Reuters.
As per the new requirements released by the government, at least 25% of the payment infrastructure, applications and software that the systems use must be developed by Russian organizations and provided under contracts lasting at least five years.