Tuesday, 17 April 2007

PayPal in South Africa

I am often asked why PayPal do not allow South Africans to receive money as it can be argued this largely prevents South Africans from fully participating in the global Internet economy. I imagine for the most part South Africans would use PayPal for International transactions i.e. receiving money from people outside South Africa for various online (and possibly offline) services. For transactions with fellow South Africans, first of all PayPal don't offer the local currency and secondly why would people want to transact using PayPal when they can use the local banking system at no (or a significantly reduced) cost compared to using PayPal? Maybe South Africans trading with each other would still use PayPal for convenience factor and the instant nature of the system (not having to wait for payments to clear - this would certainly be a plus for merchants)?

Considering PayPal has only allowed South Africans to make payments using PayPal since June 2005, some people might say PayPal is simply not interested in the South African market as it is too small. As far as I am aware the main reason PayPal does not allow South Africans to receive money with PayPal is because of South African exchange control regulations imposed by the South African Reserve Bank. There are ways around this of course. If you know some with a US, UK or Australian bank account for example you could ask them to set up a PayPal account for you through which you can receive money and you would then have to get them to transfer you this money using an International TT periodically (quite a mission). Alternatively you could set out to open a foreign bank account for yourself (even more of a mission).

Until the Reserve bank totally relaxes exchange control regulations (my tax advisor told me 2 years ago that she believed this was imminent at the time but last time I met with her she seemed to have back tracked on that opinion somewhat), I don't think we will see PayPal opening up any further to South Africans.

15 comments:

henkk said...

Hi Andy,

I recently spoke to a friend at Reserve Bank Exchange Control who said that they wouldn't have any problem with systems such as PayPal.

He suspects it's simply a PayPal decision, most likely due to them not trusting us Africans...

henkk said...
This comment has been removed by the author.
justinh said...

Hey Andy,

I wrote a long article about this issue with PayPal on my site (justinharrison.co.za). I have been using papal for a few years now, and it’s a great system, I just wish they would open it up to South Africans so that we could get full use of the system from here.

hnell said...

From the original article: "why would people want to transact using PayPal when they can use the local banking system at no (or a significantly reduced) cost compared to using PayPal?". Please tell me where to start, I want to put a donate button on a charity website, and don't want to spend too much money on the initial experiment.

ethnopunk said...

I'm also in the "I want to put a donate button on my site, and favourite charity". But it seems getting Nedbank to do this is like drawing blood from a stone. What is wrong with these people, surely they want foriegn currency inflows?

grahame.palmer said...

(I SAW THIS ON ANOTHER BLOG)

Here in the UK, signing up with paypal as a merchant takes a few minutes. You then link your bank account to PayPal and once this is “verified” you can start accepting (as well as giving) payments online. It’s quick and easy - and very much cheaper than merchant accounts with retail banks or credit card companies. So, for small traders it’s the perfect solution.

All the while PayPal was a “small fish” in the banking industry, the established banks didn’t pay too much attention to it. They were quite happy for PayPal to “mop up” smaller businesses as these were less profitable than bigger businesses.

But the big banks did not foresee a phenomenon which is now known as “The Long Tail”.

The Long Tail is a term describing the rapidly increasing number of smaller businesses compared with big established businesses, and their relative profitability to a bank. Think of it as a hyperbolic curve on a graph. The curve starts at the left of the graph very high up (high value / high profit customers). As the graph moves to the right the curve drops sharply as the value/profit of customers reduces. As the graph nears the X axis it starts to smooth out. (There are many more smaller companies than large ones, so many more less profitable SMALL clients than there are profitable BIG ones.) This “long tail” is now collectively, worth MORE than the “fat body” - and it’s growing longer fast!

Years ago, PayPal foresaw that this “long tail” of smaller, less profitable clients would grow dramatically as e-commerce became more established. Here in the UK, a HUGE number of smaller businesses are developing e-commerce websites - thousands of new e-commerce shops appear every month. Hundreds of thousands of people run these webshops from their spare bedrooms through places like e-bay, google checkout and paypal.

So today, the value of the “Long Tail” is collectively greater than the “Fat Body” of just a few years ago.

PayPal’s “lean” business model has not only enabled it to offer affordable e-commerce transaction processing to even the tiniest one-man business, but it has made PayPal profitable!

SA Banks have (as a Cartel) long enjoyed making huge profits and (through focusing on the “Fat Body”) have a business model and infrastructure that is utterly inappropriate for today’s rapidly growing e-commercial environment.

To be truly competitive in this new e-market, SA Banks would have to trim enormous costs out of their model, and perhaps sacrifice some profitability in the process.

Ironically then… IT IS CURRENTLY IN THE SOUTH AFRICAN BANKING INDUSTRY’S INTEREST TO STIFLE AND RESTRICT SMALL BUSINESS E-COMMERCE GROWTH AND THE NEED FOR THIS SECTOR TO HAVE AFFORDABLE TRANSACTION CLEARNING.

Compared to the UK, USA and Europe - where as I said, thousands of small e-shops are being established DAILY, small businesses in SA who want to go this route are either discouraged from doing so, or are failing because of the banks’ reluctance to help.

You see… PayPal doesn’t just work for the small guy… What terrifies the SA Banks is the danger of the bigger guys (Pick ‘n Pay) saying… “Hang on… we pay ABSA XXX% fee on all credit card transactions… If we let our customers pay via PayPal, then we pay LESS fees! And our customers all use paypal, so they like it and know it! AND WE CAN LOWER OUR PRICES WHICH MAKES FOR GOOD MARKETING.

Can you imagine a Pick n Pay advert:-

NOW OFFERING PAYPAL - WE SAVE YOU, THE SHOPPER EVEN MORE. COME TO PICK n PAY FOR EVEN LOWER PRICES THAN EVER BEFORE.

Until SA’s Banking Cartel is broken, and they are forced to distance themselves from the Finance Ministry’s “bedroom”, e-commerce in SA will stagnate, or be the privileged preserve of big companies only…

It’s not small business and PayPal that the SA Banking industry fears… It’s what Big Business will do, and I can assure you that if PayPal was operating freely in SA, many big companies would enable their customers to pay via paypal.

The SA Banking Cartel, in co-operation with your corrupt government is the impendiment.

PayPal retains a very low and politely discreet profile. If PayPal were to say what I’ve said above, then NO aspects of its services would be available to SA - the Cartel and the government would see to that.

What is happening right now is that the SA Banking industry is looking at how it can either fend off paypal (and similar services) or finding ways of collaborating with PayPal that do not seriously undermine their traditional business models - and ultimately, their profitiability.

sacred artist said...

Hi Andy
Internet marketers in countries like Bahamas, South Africa, Bosnia Herzegovina, Botswana, British Virgin Island, Fiji, French Polynesia, Greenland, Kazakhstan, Kenya, Kuwait, Mauritius, Morocco, Peru, Russia and Saudi Arabia are excluded to receive PayPal funds.

The solution integrates an authorized retailer which offers an out-sourced vendor solution that debits the customer's credit card and offers PayPal members a "buy now" link. Many web designers and e-commerce suppliers offer websites using their own proprietary solution. This may work extremely well, but will tie the client into a long term contract with less options to accept e-payments.

Online-e-commerce.co.za found a solution to the problem to accept PayPal and major credit cards without an offshore bank account or bank merchant approval by an authorized retailer that debits the customer's credit card or PayPal account. The out-sourced vendor solution works well for countries excluded from Paypal to receive funds.

The website owner's money is transferred into an ATM Master® debit card. This means that the Internet marketer's money is available form a local ATM. It takes five minutes to register; there's no monthly fees plug and play buy now buttons integrates into the authorized retailer system. Online-e-commerce.co.za offer clients an affordable solution at a fraction of the cost.For clients that need a shopping cart VirtueMart Shopping Cart is open source and free.

Anonymous said...

I checked out Online-e-commerce.co.za, but they did not tell me anything new in the e-book. It was a waste of money to say the least. What I need is a way to receive payments into my paypal account, and secondly have a way to withdraw those funds.

As far as I can find out, even if you can get an international bank account, you will still need that international physical address. And regardless of what anyone tells you, there is no simple way, other than getting an international address.

Anonymous said...

I searched the Internet for information and even paid for information to find out how I will be able to use Paypal fully in South Africa. I took all the information that I could find so far and wrote this article:


Can you receive money with Paypal if you are in South Africa

Nimbus said...

I have also been driving myself nuts looking for alternatives to the standard credit card accepting gateway. In a long drawn out, extremely painful and infuriating dialogue with Standard Bank I couldn't get them to understand that opening multiple bank accounts to support multiple ecommerce sites was good for them and bad for me. (bank a/c name and website name HAVE to be the same).I HATE MONOPOLIES AND CARTELS!!
Maybe not being able to use PayPal is a good thing, they too are now a monopoly.
So I've decided to go with moneybookers and/or alertpay - notwithstanding some bad feedback on the net . . . time will tell!

Nadine said...

ok so here's my question. First I want to buy trading cards on ebay because they are cheap, but I don't have a credit card. So the question is, would I be able to have money paid into my paypal account so that I can use it for purchases? I don't want to have the money paid out to a bank account, just have some to buy and yes I'm from South Africa.

Nadine said...

found out the info and the answer it no. ah well time to get that credit card.

blouhond said...

It is quite ironic for South Africa to be left out from receiving money, especially as one of the PayPal co-founders (Elon Musk) is a South African!

sacred artist said...

Hi found this site www.webs.co.za they have a work around how to accept PayPal and credit cards from you website.

sensison said...

I would really suggest checking out moneybookers.com. They are a really cool UK based company and are approaching the 10 millionth customer mark shortly. 10 million users cant be wrong.. It's really easy to sign up and use and you can withdraw funds directly into you SA bank account for great rates. They even have a web shop feature so that you can accept credit card payments from your customers. The link. moneybookers.com