02. May 2022 (in Deutsch / en Francais)
On 24 February 2022, Russia invaded its neighboring country Ukraine. In response to the unprovoked attack, Western countries imposed wide-ranging sanctions with the aim of incapacitating the Russian economy. The sanctions also excluded major Russian banks from SWIFT, the global messaging network for international payments. By early March 2022, Western payment providers, such as Mastercard, Visa and American Express, followed suit and stopped either their business in Russia or their processing of payments for cards issued by Russian banks.[1] So did the online payment provider Paypal. In this blog, we analyze payments made in Switzerland with Russian cards as documented in data available to Monitoring Consumption Switzerland.
We find that expenditures by Russian tourists matter quantitatively for certain spending categories related to accommodation and restaurants, and thus also for certain time periods during the year that appear to be attractive for Russian tourists. For the aggregate economy in Switzerland instead, the missing expenditure by Russian tourists due to the Ukraine crisis is of limited importance.
Figure 1 displays the total expenditures made with Russian cards as a share of the expenditures made with all foreign cards in Switzerland. The figure shows that in the first two weeks of 2019 and 2020, which correspond to the time of the orthodox Christmas celebrations, expenditures made with Russian cards account for up to 8% and 9% of the total expenditures made with all foreign cards. This share drops during the summer holiday period and increases again towards the winter season, accounting for an average of 2.7% in 2019 and 2020.
Figure 1: Russian Payment in Switzerland.
The decrease of the Russian share in expenditures over the summer months is due to relatively larger influx of European guests (notably from Germany and France, but also the UK and the Netherlands) whose expenditures peak twice a year, both during summer time and the winter season. Interestingly, the relative shares have not changed significantly between 2020 and 2021, indicating that foreign guests in Switzerland have been hit by traveling restrictions in a similar way.
Figure 2 shows that expenditures with cards issued in Russia decreased due to the pandemic, which has been accompanied by a significant depreciation of the Russian ruble against the Swiss franc in February/March 2020 as the pandemic hit Europe and Russia. Hitting their low in April 2020, Russian expenditures successively gained over 2020 and 2021. However, in January 2022 expenditures with Russian cards were still only about 50% of the respective expenditures in January 2019.
Figure 2: Payments in Switzerland with cards issued in Russia (indexed to 100% in January 2019).
Which merchant categories have been most affected by the absence of Russian tourists? Figure 3 shows that the expenditure patterns are quite similar to Figure 1 in the categories covering accommodation and restaurants (food and beverage services). Again, the expenditure share of Russian cards peaks in January, where this pattern is quantitatively more pronounced in these two categories with expenditure shares up to 12% of the total expenditures made with all foreign cards.
Figure 3: Russian Payments in Accommodation and Food and Beverage Services.
Remarkably, Figure 4 shows that the share of Russian expenditures in retail (for goods other than food, beverage, tobacco and fuel) increases strongly in January 2019/2020 as well. This pattern is in contrast to expenditures with other continental European cards with which foreign tourists spend less in this category during their holidays in Switzerland. Russians thus appear to make significant expenditures that are not immediately related to tourism (as the categories accommodation, restaurant services discussed above).
Figure 4: Russian Payments in Retail: Other Goods.
It should be noted that the share of Russian expenditures amongst all card payments (domestic and foreign) is rather small, accounting for 1-2% in 2019 before the pandemic. Although of limited importance for the aggregate economy in Switzerland, the presented evidence suggests that expenditures by Russian tourists may matter quantitatively for certain regions or sectors, as indicated by the large share of Russian expenditures in some categories, particularly during early January.
[1] There may still appear small transaction amounts made with Russian payment cards due to delayed processing, offline transactions, and other miscellaneous reasons. To the best of our knowledge, the Russian payment system Mir is not accepted in Switzerland.
References/Press releases:
https://investor.visa.com/news/news-details/2022/Visa-Suspends-All-Russia-Operations/default.aspx
https://newsroom.paypal-corp.com/2022-03-05-paypal-ceo-dan-schulman-message-ukraine