Ali Hasan
Sorry for the clickbait-ish headline but it’s true to some extent. PayPal didn’t completely leave India but they have shut down the domestic services and we want to know why. But before we begin, a little background about PayPal.
PayPal was founded by Elon Musk, Peter Thiel and the rest of the PayPal mafia. PayPal Holdings, Inc. is an American company operating an online payments system in the majority of countries that support online money transfers and serves as an electronic alternative to traditional paper methods like checks and money orders.
The company operates as a payment processor for online vendors, auction sites, and many other commercial users. It charges a fee in exchange for benefits such as one-click transactions and password memory. Established in 1998 as Confinity, PayPal had its initial public offering in 2002.
It became a wholly owned subsidiary of eBay later that year, valued at $1.5 billion. In 2015, eBay spun off PayPal to eBay’s shareholders. The company was ranked 204th on the 2019 Fortune 500 of the largest United States corporations by revenue.
PayPal’s Presence in India
PayPal started operations in India and in March 2011, it decided to make some changes to the User Agreement for Indian users to comply with the Reserve Bank of India regulations. The transaction limit had been set to USD $3,000, since October 14, 2011. However, on July 29, 2013, PayPal increased the per transaction limit to USD $10,000. This brings the per transaction limit for India in line with the restrictions imposed by PayPal in most other countries.
PayPal has disabled sending and receiving personal payments in India, thus forcing all recipients to pay a transaction fee. In 2012, PayPal hired 120 people for its offices in Chennai and Bengaluru. On 8 November 2017, PayPal launched domestic operations under PayPal Payments Private Limited and now provides digital payment solutions for merchants and customers in India.
As of 2020, PayPal supports the domestic card system RuPay and is planning to further integrate Unified Payment Interface (UPI) in collaboration with National Payments Corporation of India (NPCI). PayPal now has the largest global engineering team in India outside of US that is spread over Bengaluru, Chennai and Hyderabad.
But as everything was going fine, PayPal decided to shut down their domestic payments business in India. PayPal said “From 1 April 2021, we will focus all our attention on enabling more international sales for Indian businesses, and shift focus away from our domestic products in India”. “This means we will no longer offer domestic payment services within India from 1 April,” the company added.
The reason for Shutting down their Operations
PayPal said that it wanted to re-align its resources towards businesses with larger impact. “We intend to focus all our attention on enabling more international e-commerce for Indian businesses. The company said that it will invest in product development (in India) that enables Indian businesses to increase their sales internationally. As PayPal will focus on its cross-border payments business from April, global customers will be able to pay Indian merchants using the service.
“We are working with central banks and thinking of all forms of digital currencies and how PayPal can play a role,” President and Chief Executive Dan Schulman said in an interview. US account holders will be able to buy, sell and hold cryptocurrencies in their PayPal wallets over the coming weeks, the company said. PayPal plans to expand the service to its peer-to-peer payment app Venmo and some other countries in the first half of 2021.
The ability to make payments with cryptocurrencies will be available from early next year, the company said. Other mainstream fintech companies, such as mobile payments provider Square and stock trading app firm Robinhood Markets, allow users to buy and sell cryptocurrencies, but PayPal’s launch is noteworthy given its size.
PayPal has been a payments option on online apps in India such as ticketing services viz. MakeMyTrip and BookMyShow, and food delivery platform, Swiggy. PayPal saw a 30% increase in merchants using PayPal to conduct cross-border trade in the second half of 2020. Among other payment platforms, Paytm, PhonePe, Google, Amazon and Facebook are striving to increase their share in India by offering a range of payment services to individuals and merchants alike.
The company noted that it had processed $1.4 billion worth of international sales for over 3.6 lakh merchants in India last year. The company on Thursday reported a strong growth in the 4th quarter of 2020 with revenue of $6.12 billion. It reported total payment volume (TPV) of $277 billion, growing 39%. It added 16 million Net New Active Accounts (NNAs) in the fourth quarter.
This is a bit unusual and strange as PayPal’s decision came at a time when digital transactions are hitting new records every month.
Too Much Competition
The reason for shutting down their domestic services could be due to the fact that the competition is quite fierce and cutthroat. They also want to focus on a certain niche and stand out from the competition.
India has emerged as one of the world’s largest battlegrounds for mobile payments firms in recent years. Scores of heavily-backed firms, including Paytm, PhonePe, Google, Amazon and Facebook, are competing to increase their share in India, where the market is estimated to be worth $1 trillion by 2023. Several of these firms also offer a range of payments services for merchants.
PayPal still loves India
The company also said that it will continue to invest in product development through its India arm as it builds for SMEs selling to international customers. “We will continue to invest in product development that enables Indian businesses to reach nearly 350 million PayPal consumers worldwide, increase their sales internationally, and help the Indian economy return to growth.
Conclusions
To sum it up, everything’s not bad nor everything’s good but we can all say that India is still dominant in attracting many international players into the Indian ecosystem for trade and commerce. With many companies still present in the Indian ecosystem, we won’t have any problems in sending or receiving money.
But with the focus now shifted to international payments, the merchants who have international clients or are involved in daily transactions having foreign payments might benefit from PayPal’s move. Hope you liked this case study. What are your views about this incident? Do tell us in the comments. Your comments are valuable to us and we will be replying back to the ones which we find interesting.
