Handling properly PayPal in Bangladesh
(Published in the Financial Express on 27 July, 2011)
Abul
Kashem Md. Shirin
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PayPal
is a virtual Bank cum internet payment gateway originally launched to pay to
the ‘pals’. As a bank, it allows the individuals, e-merchants and institutions/organizations
to register (open account) online, keep money in the account and exchange money
in between them (normally B2P – Business to Person). As an internet payment
gateway, it settles payment made by the individuals to the merchant’s website
using cards, bank account or PayPal account (P2B – Person to Business Payment).
While
an individual is registered in PayPal, he provides his card or bank account
information into the system. Thus while paying to a business (e-merchants), he
does not require to give out card or bank account related information to the
merchant website, but he will insert only the PayPal account number. Thus the
customer’s card or bank information will not be exposed to many unknown places.
PayPal
has grown in recent years to be one of the most popular methods of online
payment. Thousands of businesses accept PayPal payments (P2B). On the other
hand millions of individuals receive payment from their online employers against
their freelance online jobs (B2P).
If
an individual is not a member of PayPal, he can also pay to an e-merchant
through PayPal inserting his card details. Because it is not mandatory that the
customers be members of PayPal in order to complete transactions, it is
possible for the merchant to serve just about anyone. The versatility is one of
the reasons that PayPal is so popular as a payment provider. Transactions are
secure, and it is generally easy to set-up and integrate PayPal payment
options. At present PayPal has over 153 million accounts worldwide across 190 markets and operates
in 23 currencies.
PayPal users in Bangladesh:
In
Bangladesh, many individuals have account with PayPal. They mainly use their
PayPal account to receive payment from different employers against their completed
online jobs related to computer programming, accounts, HR, poster design,
animation etc. Such jobs are available in the broker websites such as Odesk.com
and Vworker.com. The employers post a job in a website.
To
get a job the individuals first become member of these broker’s websites. While
registration, the individuals mention the expected payment method. Available
payment methods are PayPal, Payoneer, Moneybookers etc. Then the broker
introduces the new client to the authority of the mentioned payment method for
opening account. The Payoneer, after registration, provides the client with a
pre-paid MasterCard using which he can withdraw money from an ATM in
Bangladesh. Moneybookers transfer money to the bank account of the client in
Bangladesh using SWIFT and this money is taxable from 2011. In case of PayPal,
the individual can open an account online, but can’t select ‘Bangladesh’ as his
home country, as PayPal has no arrangement with Bangladesh Bank. Thus the
Bangladeshi clients normally use a friend’s PayPal account who lives abroad and
collect money from his friend through informal channel. The Payoneer charges
USD24 per year to the client, and the client needs to pay USD1.00 per
transaction for withdrawing money from an ATM. However the transfer of money is
almost instant. The Moneybookers charges
USD 2-3 per transaction for SWIFT transfer, and it requires 3-5 days to
transfer the money. Resolution of disputes in case of Payoneer and Moneybooker
(like employer paid, but they have not deposited money into the clients
account) is complex. On the other hand the PayPal’s fee is minimal and payment
is most reliable.
Once
the individual become member of a broker’s website and opened an account for
receiving payment, he can quote for a job. Depending on the quoted price and bidders’
previous scores in completing similar online jobs, he gets the job.
Approximately
there are 100,000 individuals who are working as freelance coder/outsourcer in
Bangladesh. The earning of an average individual is taka 30-40 thousand per
month and for an expert may be more than taka 300,000/- per month.
Issues related to PayPal acceptance in
Bangladesh:
There
are some issues to be considered by a Central Bank while permitting the PayPal.
To make these issues understand, let us take an example of Tarek (an imaginary
person). He is a freelancer in Bangladesh and his employer in U.S. paid him USD
100 via PayPal for his services. The money gets deposited in his online PayPal
account.
He
can use that money in three different ways – he can either transfer it to his
local bank account in Bangladesh (via paper cheque or wire transfer, if the
Bangladesh Bank permits), or he can do some online shopping with that money from
the website which accepts PayPal payment or simply let it accumulate in his
PayPal account.
If
the Bangladesh Bank allows transferring money from PayPal account to a
commercial bank, other issues may come up.
The
money coming to Tarek’s PayPal account is an income by a Bangladeshi resident
and thus is taxable. Unless he self-declares it or transfers it to his bank
account, the tax authorities won’t have a clue about it.
Therefore
it may be made mandatory that PayPal transfers money automatically to the
individual’s bank account as soon as it comes to the PayPal account. Bangladesh
Bank may make such arrangement with PayPal.
Another
issue is that all the commercial banks are closely monitored by the Bangladesh
Bank. Transactions of individual customers in each of the banks are also
monitored by the Bangladesh Bank through various reports and periodic
inspections.
In
a PayPal account, a Bangladeshi individual can deposit money, withdraw money
and make payments. Thus PayPal may be considered as an online (virtual) bank in
Bangladesh. But the Bangladesh Bank has no mechanism to monitor the
transactions in PayPal or the PayPal activity. Therefore it is the best way not
to monitor the PayPal, instead bring all the money deposited to the Bangladeshi
PayPal accounts in a commercial bank in Bangladesh.
Experience of India
Reserve
Bank of India (RBI) made an arrangement with PayPal, according to which, starting
1st March 2011, Indian individuals are not allowed to receive payments
that exceed USD 500 per transaction through PayPal account. They are not able
to keep any money in the online PayPal account – all money received into PayPal
must be transferred to an Indian bank account within 7 days. Also they will not
be able to buy goods using the money that’s in their PayPal account. If they have
to make payments via PayPal to someone or shop, they will link their Indian
credit card to the PayPal account. Thus RBI
is able to impose foreign currency restrictions on individuals.
India
has about 230 million cards in circulation, as of January 2011, compared to
approximately 194 million cards during the same time last year. Moreover, the
number of claimed internet users (those who have been online at some point) is
poised to grow 96 per cent by the end of this calendar year to 29.9 million. The e-commerce landscape in
India is booming, and more and more Indians are using PayPal as a solution.
PayPal sees India as the big market to develop, either from a buyer’s or
seller’s perspective. This made the PayPal to comply to the RBI guidelines.
To what extent
we can impose?
Is the Bangladesh market large enough to comply
PayPal to a guideline similar to RBI? The simple answer is no. Therefore our
first step may be to start with legalizing opening account with PayPal by any
Bangladeshi individuals (in other word approving PayPal as a virtual Bank in
Bangladesh for limited activities), and to accept transfer of money from PayPal
account to a commercial bank in Bangladesh by depositing PayPal cheque or by wire
transfer. Gradually with the growth of the market, we may impose other restrictions.
The writer is a DMD at Dutch-Bangla
Bank and can be reached at
