PayPal Refused To Launch Its Services In Pakistan Due To These Reasons

PayPal is Not Coming In Pakistan

According to World Bank study from 2017, Pakistan has one of the lowest financial inclusion rates in the world, with only 21.3 percent of the population having access to banking services and only 14.3 percent making digital payments. This shows that the digital payment environment is given minimal importance, either because of conventional banking mindsets such as the usage of paper for checks and money orders, or because of other structural issues.

During the pandemic's peak, the usage of digital payments and internet commerce rose dramatically. However, businesspeople, dealers, and freelancers continue to have difficulties with digital payment services, since PayPal — a global financial channel that facilitates online transactions – has rejected to begin operations in Pakistan.

PayPal is an American firm that operates in roughly 200 regions and has 277 million registered accounts. It is the world's largest third-party services provider of monetary transactions, with high-tech account security and a top-notch financial management system. Customers may also transfer, receive, and retain funds in 25 other currencies.

 

Around 200,000 Pakistani freelancers and over 7,000 registered small and medium enterprises (SMEs) rely on PayPal services to do business with foreign corporations without the headache of currency conversion.

Pakistan is the fourth fastest-growing freelance market, with revenue growth of 47 percent (Payoneer, 2019), surpassing neighbouring nations such as India and Bangladesh, as well as Russia.

From the third quarter (Q3) of 2018 to the second quarter (Q2) of 2019, Pakistani freelancers climbed by 38%, somewhat less than India (41%).

This rise in the number of freelancers in Pakistan is propelled by a young population, with 77.3 percent of the population under the age of 35.

It's achievable thanks to technologically oriented instruction backed up by practical-indicating young people who are more involved in business operations.

 

"4G connectivity across Pakistan has offered freelancers unparalleled access to foreign work," said Mohsin Muzaffer, Payoneer's Head of Pakistani Business Development.

If increased 4G coverage leads to an increase in the number of freelancers, freelance earnings, and overseas employment, the availability of digital payment systems such as PayPal will aid in the simple and safe receipt of money from international jobs.

Why are young Pakistani freelancers, who drive the gig economy, unable to do business more easily in the world's fourth-largest freelancing country? Why does PayPal, a prominent worldwide payment gateway, not operate in Pakistan? Why don't freelancers have access to a safe and reliable payment system? Why is PayPal available in Nigeria, Kenya, Somalia, Angola, Burundi, Chad, and Comoros but not in Pakistan?

In recent years, Pakistani government delegations have met with PayPal officials to discuss these concerns, but the company has refused to launch its services in Pakistan.

 

"PayPal is reluctant to come to Pakistan unless there are regulations to safeguard the company's interests," Senator Mian Mohammad Ateeq Shaikh said during a hearing of the Senate Standing Committee on IT.

 

PayPal's unwillingness to operate in Pakistan also raises some more severe problems, which are impeding the expansion and efficacy of the company's digital payments network. To begin with, large international payment gateways like PayPal, Google Pay, and Stripe have zero tolerance for money laundering, which is rampant in Pakistan owing to a variety of loopholes. Pakistan remains on the Financial Action Task Force's (FATF) grey list, and its rampant money laundering is being watched.

 

Second, credit cards have been the driving force behind the digital payment environment, and PayPal is looking towards POS and credit card penetration in Pakistan, which is not good.

 

Third, according to the State Bank of Pakistan, any international firm seeking to function in Pakistan must pay a $2 million licencing fee, which is a huge sum for a corporation like PayPal, which makes two to three percent each transaction (SBP).

Fourth, due to State Bank laws, PayPal faced stringent limits regarding the keeping of any sum in a PayPal account shortly after launching its services in India and Bangladesh. PayPal and other comparable corporations have been hesitant to enter South Asia, particularly Pakistan, due to this worry.

 

Instead of using PayPal, Pakistani freelancers must go through a lengthy and insecure process to do international internet transactions. To acquire verified PayPal accounts in Pakistan, they first register bank accounts in the United States. Then, to make transactions in Pakistan, users link their PayPal accounts to other third-party monetary transaction service providers like Payoneer and Xoom. These options aren't as efficient, reliable, or practical as PayPal. Payoneer Prepaid MasterCard cardholders recently lost access to their accounts due to a controversy involving the card's issuer, a German company named 'Wire Card AG.'

So that Pakistan's digital payment ecosystem thrives, the government, the Ministry of Information Technology and Telecommunication, and the SBP must adopt policies to initiate initiatives to foster and support a culture of freelancing by offering digital payment options. For example, to encourage domestic firms, India created programmes such as Startup India, Skill India, and Digital India. Between Q3 of 2018 and Q3 of 2019, these initiatives permitted a 52 percent growth in the number of Indian freelancers compared to a 42 percent increase in the number of Pakistani freelancers.

To make integration of multiple providers simpler, the government must fundamentally eliminate money laundering, decrease banking system overregulation, regulate cybercrime, and upgrade the financial industry from antiquated systems to open Application Programming Interface (API) platforms.

 

Under the current COVID-19 situation and devastating economic crises, it is past time for the incumbent government to start taking the necessary steps to boost e-commerce and create a digital payment ecosystem that will allow Pakistani freelancers and traders in cities like Karachi, Faisalabad, and Gujranwala to join them.