KARACHI: Pakistan’s freelancer community, which is said to be the fourth largest in the world, has expressed disappointment over reports of PayPal not extending its services to the country.

PayPal operates a worldwide online payment system that supports online money transfers refused to introduce its services in the country. The company operates in 190 markets across the world.

There has been a repeated demand from freelancers and e-commerce players to bring PayPal to Pakistan. Former finance minister Asad Umar had also shown commitment to facilitating its arrival.

Around 200,000 self-employed workers face a host of payment issues

The effort has, however, been in vain.

On Thursday, a Senate committee was informed that the US company would not come to Pakistan. “PayPal did not decline because it has issues operating in Pakistan, [but] their internal working is such that they are not ready to introduce services in Pakistan,” Information Technology Secretary Maroof Afzal had told the Senate standing committee on IT.

If PayPal comes to Pakistan it will facilitate around 200,000 freelancers and over 7,000 registered small and medium enterprises (SMEs). Besides, there are also thousands of e-commerce contributors who are not registered.

“PayPal is the de facto payment mechanism abroad. What has happened in the absence of PayPal or an internationally recognised payment gateway is that freelancers and SMEs have hacked other ways of doing services and getting money from abroad,” Secretary General of P@SHA, Shehryar Hydri said while speaking to Dawn.

Explaining how these hacks work, he said the SMEs had accounts opened abroad through their relatives or someone they know and receive payments there. “From the government’s point of view, this is a major leakage in the system when people are forced to keep their money abroad,” he added.

About PayPal’s reservations over extending its services to Pakistan, Mr Hydri regretted that a major drawback was that the point-of-sale system (POS) had not really taken off. “International companies such as PayPal look into transaction numbers and bank accounts when considering joining a market. In Pakistan, POS and credit cards penetration is not healthy,” he said.

According to the State Bank of Pakistan, the total number of credit cards currently stands at 3.6m whereas the share of debit cards is 52.4 per cent with 21m cards issued by commercial banks. By the end of 2017, the number of bank accounts had reached 49m.

“[To be able to move forward, we need] an internationally recognised payment gateway like Alipay and a home-grown payment mechanism that benefits the economy domestically,” suggested Mr Hydri.

Given PayPal’s demand due to easy-to-use mechanism, trust across the board and fraud prevention, the freelancer community, which is currently using non-banking (informal) channels to receive payments, is faced with a host of issues.

“The dollar rate for payments at banks is very different from the open market. If the exchange rate is Rs148 for a dollar, we get the payment at Rs141,” said Faiza Yousuf, founder of OuttaBox company in Karachi.

Faiza, who relies on international payments for financial operations, said that relying on bank transfer and local channels meant waiting for days to receive payment. “With PayPal one can send the invoice directly to customer or through easy integration on the website within two minutes,” she said.

Besides reductions and delays in payments, the choice of clients available to work with local start-ups and freelancers is also limited. “On Upwork (a global freelancing platform), most clients refuse to work because they only trust PayPal for transactions,” she added.

In August 2018, according to the SBP, Pakistan’s IT export crossed $1 billion mark for the first time in history.

The PTI government has chalked out plans to boost IT exports to over $6 billion by 2020 and $10 billion by 2025, and has also emphasised on the digitisation of the economy and the IT sector. It has formed a special task force on IT, comprising big names of the industry, to create jobs and facilitate exports. However, the e-commerce community believes that the government is not doing enough to facilitate the IT industry.

“PayPal never agreed to come to Pakistan in the first place. Pakistan’s market size is not good enough for the American company and even the credit card penetration is less than three million,” said the National Incubation Centre, Karachi director Shahjahan Chaudhry while speaking to Dawn.

“We need to work on our value proposition to convince such companies to come to Pakistan. We are not answering what they need,” he said.

Published in Dawn, May 18th, 2019