Visa, Mastercard arrive in Syria. Will this help the economy?

The launch of Visa and Mastercard payments has been lauded as a milestone in reintegrating Syria into the global economy, though its effect is unlikely to benefit most people in the country, according to analysts speaking to The New Arab.

On Tuesday, both Visa and Mastercard issued statements saying that tests of the payment systems had been successful, while footage published by an Syrian government account on X, Syrian Response, showed President Ahmed al-Sharaa paying with a Visa card in Damascus.

"For more than fifteen years, this simple transaction was impossible. Today, in the oldest continuously inhabited capital in the world, Syria's return to the global financial system became a fact," Syrian Response said in its post.

Analysts have cautioned, however, that given Syria's underdeveloped banking system, the economy's reliance on cash, and the overwhelming levels of poverty that remain, that the benefits from Visa and Mastercard are unlikely to filter to ordinary people.

Jad Baghdadi, a Nonresident fellow at TIMEP, explained to The New Arab that there were several important benefits that are likely to come as part of the launch of both payment systems.

"The clearest is diaspora remittances, where it should make money easier and potentially cheaper to receive."

"It also helps with cross-border payments, supports tourism and e-commerce, and lets some Syrian businesses transact internationally," he added.

Senior Vice President and Group Country Manager for the North Africa, Levant and Pakistan region at Visa, Leila Serhan, called the move "an important milestone in the development of Syria’s payments ecosystem", while Mastercard said the move reflects the company's "broader commitment to supporting a modern, secure and inclusive payments ecosystem in Syria".

The two companies were able to set up the transactions following Syria's removal from the US-designated list of state sponsors of terrorism, which it had been on since 1979.

The announcements were made with Syria's Central Bank, which had earlier in May said that local banks and electronic payment firms could work with global payment networks, including Visa and Mastercard.

'Benefitting a minority'

Baghdadi caveated that government policy will ultimately determine whether the full benefits of Visa and Mastercard operations in the country are felt in the coming years.

"What decides whether that integration deepens, and whether investment actually flows in, has far more to do with the quality of economic governance, transparency in public contracts, procurement, and institutional reform, as well as wider geostrategic considerations," he said.

Similarly, Swiss-Syrian academic Joseph Daher told The New Arab that there were several challenges facing the widespread adoption of digital payment systems in the country, including limited infrastructure to support its expansion.

He added that several other problems include "the low proportion of Syrians with bank accounts and limitations of the national financial and banking system".

With structural problems continuing to affect Syria's economy, such as low purchasing power, Daher said that the announcement "will therefore only benefit a small minority of Syrians able to afford a Visa card and having the financial capacities to reach such a card".

Though the International Monetary Fund projects Syria's economy to grow above 10% through 2026, it warned that poverty in the country remains high, as does inflation.

Baghdadi said that poverty in the country affects nine in ten people, and that though most transactions are still cash-based, there is a shortage of banknotes in circulation.

"A payment card only means something if you have money in a bank account and a shop with a card reader to use it in, and for now that describes a relatively small and mostly urban minority."

What will impact the daily life of people more is food and fuel prices, whether wages keep up with inflation, electrical access, and job creation, he added.

"Card networks and correspondent banking are part of what a functioning economy needs, but they sit a long way from those daily realities. So despite these developments, the road to recovery is still a long one."