PayPal is an electronic commerce company that facilitates payments between parties through online transfers. Without a doubt, it is the world’s most popular payment gateway service. PayPal allows customers to establish an account on its platform, which is connected to a user’s credit card or savings account. Uniquely, once identification and proof of funds are confirmed, users can begin sending or receiving payments to and from other PayPal accounts. In general, this can take place online or through the company’s app. However, as of November 2021, things don’t operate as above for PayPal in Sri Lanka.
Is PayPal completely barred?
Not really. PayPal users from Sri Lanka can pay sellers in other countries for their purchases via the service. However, PayPal had barred Sri Lankans from receiving payments. In particular, we can safely assume that this is due to both the size of the Sri Lankan economy and the lack of data about the potential of the Sri Lankan market. Additionally, it may be due to the anticipated low volumes that it does not scale to have a full-service PayPal in Sri Lanka. Having said that, there are many PayPal users in Sri Lanka facing a huge problem because PayPal does not support withdrawals to our country. For instance, Sri Lankans who want to sell goods on online platforms like Ebay.com and independent software developers have been asking for PayPal. To explain, this is due to the comfort level of overseas firms who are familiar with paying local contract workers using PayPal.
When will PayPal be available in Sri Lanka?
Things are a bit sceptical here in Sri Lanka. As per Muhunthan Canagey, head of Sri Lanka’s state-run ICT agency (Information and Communication Technology), PayPal services will be available soon in Sri Lanka. That is to say, his agency is currently in the process of initiating a broad payment platform where all local banks will be on board. From what I have read, when PayPal is fully functional in Sri Lanka, local banks will partner with this service. On the flip side, the Central Bank of Sri Lanka has had discussions with PayPal for many years. In this case, these discussions have not been fruitful as of 2021.
How will Sri Lanka benefit from PayPal?
PayPal will open an integral avenue for Sri Lankan startups and small and medium scale enterprises (SME’s) to showcase their products to the global markets while receiving payments online. Explicitly, this flexible payment gateway will provide a much-needed boost to the country’s exports. Further, it will help achieve the country’s export targets. Notably, PayPal acceptance will help create a financial and socially inclusive community. Especially, when PayPal in Sri Lanka is fully operational, it will allow e-commerce merchants to receive payments for their goods and services from across the globe.
This will be in exchange for a transaction commission of 1.9-2 per cent. In fact, this is much lower than the existing inward remittance fees charged by digital platforms promoted by local banks. Here, it should be pointed out that some internet payment gateways set up by some local banks charge exorbitant fees. By all means, this includes the annual rental fees as well as commissions of more than 3%. In particular, such a high service fee attracts a select clientele. Additionally, these fees are a limiting factor for start-ups and SME’s, as they will eat into their margins.
Digital payments during the pandemic
The covid-19 pandemic changed the way we work and transact business in Sri Lanka. In effect, most worked remotely in the comfort of their homes while many brick and mortar businesses closed down. Uniquely, the pandemic brought to light the global financial architecture, which is essentially digital. In fact, the adoption of digital payment platforms proved extremely useful during the pandemic. Thus, Sri Lankan banks carried out many promotional activities during and after the pandemic to popularize digital payment mechanisms among the public. Here, we can safely assume that Sri Lanka’s financial stakeholders are aware of the benefits of digital payments.
How will a Sri Lankan SME benefit from PayPal?
PayPal is a global payment gateway trusted by millions of users worldwide. For example, PayPal is especially popular in Germany and the UK. Also, the USA currently has 377 million active users of PayPal. In fact, most developed markets use PayPal aggressively. Just imagine the potential for a Sri Lankan business in this space. For example, a Sri Lankan spice exporter having the PayPal payment gateway will attract many buyers. This is so as PayPal is a trusted payment platform that most developed markets are aware of. What they need is education on how to set up a PayPal account. However, for all this to materialize, PayPal in Sri Lanka should be recognized to allow Sri Lankans to receive payments through PayPal.
