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Tuesday, January 27, 2015

MasterCard leads way for U.S. card acceptance in Cuba

If you're planning a trip to Cuba any time soon you may want to take along your MasterCard, because U.S.-issued American Express, Discover and Visa cards can't be used on the island nation. That's the situation for now, at least.

MasterCard Worldwide is the first card brand to lift a decades-old ban on using U.S.-issued credit and debit cards for transactions with Cuban sellers, effective March 1, 2015. The move, heralded on the company's website Jan. 23, follows word out of Washington, D.C., last month that the federal government was relaxing restrictions on Americans traveling to Cuba or doing business with Cuban firms and individuals.

American Express Co., Visa Inc. and Discover Financial Services have not followed suit, although according to published reports, similar moves are under consideration at both Visa and AmEx.

MasterCard said it decided to lift the ban based on "recent guidance" from the Office of Foreign Assets Control, an office within the U.S. Treasury Department agency that administers and enforces trade sanctions related to foreign policy. "MasterCard will work with its U.S. issuers to support their Cuba-related activities and decisions," the card company wrote. "Before travelling to Cuba cardholders should contact their bank to ensure the card will be supported on the island."

Lifting costly sanctions

Trade sanctions are implemented whenever foreign countries, regimes, terrorists, narcotics traffickers and others are deemed threats to national security, foreign policy or the U.S. economy. OFAC imposes hefty fines on U.S. companies and individuals found to be in violation of sanctions. In the first 11 months of 2014, OFAC assessed over $1.2 million in civil penalties to a Portland, Ore., company that violated U.S. sanctions on Cuba by purchasing goods, between 2007 and 2011, that used raw materials sourced in Cuba.

The Cuba sanctions date back to 1961 and were a consequence of the Cold War. President Obama announced in December 2014 that the U.S. would relax many of those sanctions, thereby permitting Americans to travel to and do business in Cuba.

While the government has eased some restrictions on trade and travel, the White House noted that the long-standing trade embargo remains in place, pending additional negotiations between the two countries and congressional approval.

Recently, OFAC published details on the lifting of Cuban sanctions. Listed were several specific activities that are now permissible for U.S. banks, companies and consumers. According to a U.S. Treasury fact sheet, these allow:

  • Financial institutions to establish correspondent accounts at Cuban financial institutions.
  • U.S. financial institutions "to enroll merchants and process credit and debit card transactions for travel-related and other transactions"
  • Travel agents and airlines to book travel by Americans to Cuba.
  • Travelers "to engage in transactions ordinarily incident to travel within Cuba … Additionally, travelers will now be allowed to use U.S. credit and debit cards in Cuba"

Going global

Leading acquirers recognize the value of expanding beyond local markets and domestic borders, especially as more U.S. merchants take their businesses to new markets. And although Cuba is not a large market, the island's proximity to the United States and pent-up demand following decades of restrictions on travel and trade suggest new opportunities for driving card payments.

Growth in e-commerce also is stoking interest in international sales and card payment acquiring. The international consultancy OC&C Strategy Consultants predicts international sales by U.S. online retailers will grow from $25 billion in 2013 to $130 billion in 2020. OC&C collaborated with Google Inc. to come up with its predictions, published last year in the report The Global Retail e-mpire.

"Over the next decade, online retail will become even more international," said Anita Balchandani, a partner at OC&C. "This represents a great opportunity for retailers." Balchandani said that online marketplaces like eBay, will contribute to the trend. "We expect online marketplaces to be part of the mix for retailers particularly in the early days of their international expansion, and to play a complementary role with a retailer's own website and stores."

"We believe it's time to declare the 'death of distance,'" Alex Von Schirmeister, eBay Inc.'s point man on European expansion, said in a statement issued by OC&C, which operates from offices in Boston and Europe. "Cross-border trade on eBay in the second quarter of 2013 reached $11 billion, representing 22 percent of the company's total commerce and payments volumes," he noted. end of article

Editor's Note:

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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