Dissecting PayPal for Small Economic Countries focusing on Maldives
Read this articles on my LinkedIn Blog now
___________________________________________________________
It was in 2008, when I officially signed up to PayPal and linked my visa Debit Card to explore the mystical world of eBay (who had acquired paypal in 2002) as the auction fever caught up with me & later used it for upgrading to a flickr Pro account. As the years progressed, remember using it as means of safer transaction where-ever it was available.
Few years ago, it was during a stakeholder meeting of creative economy entrepreneurs, that I heard PayPal is a major challenge to the growth of Maldivian entrepreneurial ecosystem. As i dissected into how this was a problem, many freelancers highlighted that the issue of not been able to receive money via PayPal as the major concern for earning income through sales or services via global platforms/providers.
As years went on, I have been hearing many reasons of why PayPal is not in Maldives and mostly it is about our financial regulatory system been weak and we needing more laws — for PayPal to make a market entry into Maldives. This never ending tale continue in any meeting organised to understand the challenges faced by startups or those in the gig economy. A bubble that grows but never pops!
So What is PayPal?
PayPal is the safer, easier way to pay and get paid online. The service allows anyone to pay in any way they prefer, including through credit cards, bank accounts, PayPal Smart Connect or account balances, without sharing financial information. PayPal has quickly become a global leader in online payment solutions with more than 267 million accounts worldwide. Available in 202 countries and 25 currencies around the world, PayPal enables global e-commerce by making payments possible across different locations, currencies, and languages. (About — corporate website)
Decoding PayPal led me to many articles on the web, where the horror story of their currency conversions and how the amounts dwindles when it ultimately reach the receiver accounts or how they are unable to withdraw or receive money via PayPal.
Understanding PayPal — Maldivian Dissect
Although PayPal says that they have officially two types of accounts — Personal and Business, it varies from country/Region to country/Region from where you sign up & use the service. Let me explain this using an article they published in July 2018.
- SRW : This type of accounts or rather users, have the ability to Send, Receive and Withdraw payments. They call it SRW type and according to the article 55+ countries have this features enabled for their accounts.
- SRW + Account Transfer: They have SRW status and along with that they have the option for automatic transfers to their US Bank Accounts. As per the article, only 19 countries have this very premium feature.
- Send Only: These countries only have the option to SEND or Make Payments and around 80+ countries belongs to this list.
Thereby breaking the misconception, that PayPal lets over 200+ countries to send and receive funds as stated or argued by many. Whereas only selected countries have SRW and majority of the countries have no provision for receiving or withdrawing funds from their PayPal accounts.
Among them is Sri Lanka, whose government and their central bank has made tons of effort to bring all features of PayPal to Sri Lanka and is still continuing the conversation, after they officially called off all the attempts on that front in 2019. Although Pakistan was able to use XOOM (a subsidiary of PayPal) for similar purposes, they have not been able to get hold of PayPal in their country. The most interesting fact is that PayPal has never officially stated the reason why they don’t allow all the features to their users from these countries
Maldives also belongs in that 80+ countries and just as them, the governor of MMA discussed the same issue during his meeting and in an article I read, it was highlighted that one of the reason behind paypal unavailability to open all features for Maldives, is the lack of proper laws & regulations. Which could be true but if you go through the 80+ countries in that list, you would be able to make an understanding of whats really happening (a pattern analysis). This also backs the theory as from the list, we see that most of these countries recently graduated their country development status and often times have an aged legal structure, which is not aligned or compliment to the current legal requirements needed for such products to operate on these markets.
There is a large speculations that the trading and banking regulations of these countries doesn’t fit to the US trade laws etc and some of these countries demand PayPal to take banking license to operate on such forefronts or gets embroiled in the politics of these countries with regulatory changes (Turkey is a classic case to look into)
Maldivian / Small Economy VS PayPal Requirements?
Looking at the patterns of the 80+ countries and our own economy, the question that loom around is the size of the economy, the presence of the online business market and most importantly the transactions thats gonna be created via PayPal. Apart from this any inward remittance needs to go through the checklist of MMA and then getting BML connected to verify the accounts further. Now I don’t think we need to do further analysis on that as we see that our numbers are limited than most of the countries in the list. Although many have listed the countries with smaller population where PayPal is still giving the full services, without understanding the economic conditions of these countries as some are territories of USA, some are major financial hubs and others are countries with huge infrastructure around offshore banking facilities.
The Sri Lanka’s rejections apparently was due to the size of the economy and their online business market. They had tons of meetings and still struggling to get this running considering their creative economy (major users) are larger in number with better infrastructure and regulations than Maldives. Many of these governments are actually trying their best to bring PayPal to their respective country.
Interestingly entrepreneurs from these countries have found a gap and have come up with novel products to address this issues and formed startups to cater to the market demand by becoming a bridging service (Like the one pakistan and sri lanka) between PayPal and those entrepreneurs who are seeking the service.
XOOM.COM (founded in the year 2001) is an electronic funds transfer and remittance provider, which allows consumers to send money, pay bills and etc to many of the countries where the SRW service of PayPal is not available. Xoom was acquired by PayPal in 2015 and branded as XOOM — A PayPal Service and many countries where PayPal is not able to give their services irrespective of because of smaller volumes or weaker regulations, they have partnered with Banks and provided the services through this.
There are many other similar products that you could explore but atleast I hope that now when you talk about PayPal as an issue, you know what you are talking and that it is a developing country issue. So you could decide either to wait on it or move on!
But who knows, PayPal might just reverse their conditions and terms and decide to penetrate into any of these countries, but until then — lets work on working with whats available and at the same time ensuring we have a robust legal framework which supports the current conditions and ready for the digital leap needed for many of these countries.
We can keep continuing talking about this as a barrier or we can find ways around and address this. Entrepreneurship is never easy and that's why the word Hustle is used as a prefix to it!
To those who read my twitter thread, this is longer version. Twitter Thread Link. If I have quoted or said anything incorrect or factually wrong, please forgive my ignorance and correct me.
____________
Read this articles on my LinkedIn Blog
