Will PayPal never come to Pakistan? Know Here

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Pakistan’s financial sector received yet another shock recently when it was revealed that PayPal, which the present government was keen to introduce here, had declined to come to Pakistan, citing internal issues.

Will PayPal never come to Pakistan? Know Here

PayPal is a well-known online payment system that makes sending money internationally easy.

The American firm was created in 1998 and had offices in several major nations worldwide, but not in Pakistan.

PayPal had over 400 million users globally at the time of writing and generated over $25 billion in annual income.

Local freelancers have long complained about the lack of PayPal in Pakistan, but the issue is resurfacing lately. #PayPal is trending again on Twitter, with hundreds requesting an official debut in Pakistan.

The tweet also includes a link to a CNBC report from 2019 that lists the top 10 fastest-growing freelance markets. Pakistan came in fourth place, with a 47 percent increase in self-employment wages year over year (2018).

The new trend coincides with Pakistan’s recent change of leadership. Shehbaz Sharif of the Pakistan Muslim League-Nawaz (PML-N) has taken over as Prime Minister, and people are using the chance to demand the changes they want.

What about regional restrictions?

Money laundering isn’t the only reason why PayPal is hesitant.

Bangladesh, which introduced PayPal within a six-month time frame, has imposed certain restrictions which hinder the company from performing efficiently in the country. The Bangladesh Bank, which is the central bank of Bangladesh, has forbidden any user of PayPal within the country to send money abroad, a measure that has limited the company’s profit margins.

Similarly, the Reserve Bank of India has deemed it illegal to retain any amount in PayPal accounts, and hence all receipts ought to be transferred to people’s bank accounts. PayPal entered the Indian market in 2017 to capitalize on its booming e-commerce industry. However, it faces stiff competition from domestic players because it charges a substantially higher fee than local payment systems. India is a much bigger IT and e-commerce market than Pakistan, yet PayPal is struggling there.

Overall, India, Bangladesh, and even China have become troublesome for the company.

Moreover, the SBP has introduced severe limitations and restrictions upon bank accounts to combat money laundering, which is why it would not be surprising if PayPal expects similar regulations from Pakistan and is thus unwilling to take the risk of expanding here.

Is there any hope?

Talks between PayPal and Pakistan have not yet ended, and its government has not stopped trying. However, due to a lack of online money transfer systems, Pakistan is losing massive foreign exchange, and its thriving freelance sector is negatively impacted. When Pakistan is undergoing a digital revolution, PayPal can aid the country’s thriving freelance industry.

Meanwhile, the SBP permitted the use of Xoom, a PayPal-owned company, to facilitate contributions from overseas Pakistanis to the dam fund. Following the approval, Xoom – a system that offers quick money transfers, including same-day deposits in registered banks – agreed with five major banks and functioned normally in Pakistan.

Apart from this, a platform similar to PayPal known as Alipay announced its entry into Pakistan in mid-2018. The company is expected to roll out its services soon. Owned by the Alibaba Group, Alipay is expected to revolutionize the online payment system and transform the e-commerce market in Pakistan. If Alipay turns out to be a success, PayPal will inevitably come here.

If PayPal expands to Pakistan, it is expected to face tough competition from the recently introduced QR payment system. A user scans the QR code through their smartphone to make online payments (a cashless option).

Further, people in Pakistan still prefer cash over credit, so the more complex PayPal may not become as popular as we hope it will or as it is internationally. The threat of security breaches also remains due to the poor security system in Pakistan.

Nevertheless, PayPal has immense potential and opportunities here, and one hopes the company takes the leap and considers Pakistan a potential market for expansion.

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