The Truth About PayPal's Entry into Pakistan: Debunking the Minister's Claims

In a recent announcement, Pakistan’s Caretaker IT Minister, Dr. Umar Saif, stirred excitement by suggesting that PayPal would soon be available in the country. However, a fact check reveals a different reality. Contrary to the minister’s claims, the renowned payment giant needs to establish operations directly or indirectly in Pakistan.

According to sources, the confusion stems from a partnership between PayPal and Payoneer. While the minister indicated that PayPal would operate indirectly in Pakistan through this collaboration, the partnership primarily involves adding PayPal as a payment method on the Payoneer platform.

For instance, if a US-based company outsources work to freelancers in Pakistan, they can use Payoneer to make payments, and the recent partnership allows Payoneer users to utilize PayPal as an additional payment method alongside debit or credit cards. However, it’s crucial to note that this doesn’t grant Pakistani users the ability to open a PayPal account directly or via Payoneer.

The partnership with PayPal is not exclusive to Pakistan but spans across all geographies where Payoneer operates. The minister’s statement may have inadvertently fueled expectations for PayPal’s direct entry into the Pakistani market, potentially complicating ongoing efforts to bring the service to the country.

The quest to introduce PayPal in Pakistan has been a focal point of policy discussions, mainly due to the rising demand from freelancers. Pakistan, ranked as the fourth-largest country in terms of freelancers, has been actively pursuing partnerships with global payment service providers like PayPal and Stripe.

Despite the ongoing efforts, challenges such as perceived restrictions associated with electronic money institutions (EMIs) licensing, concerns about money laundering, and restrictions imposed by the Financial Action Task Force (FATF) have hindered PayPal’s full-scale operation in Pakistan.

Dr. Umar Saif’s recent announcement may have generated optimism, but it’s crucial to clarify the nature of the PayPal-Payoneer partnership to manage expectations accurately. While freelancers may benefit from improved payment options, the direct availability of PayPal accounts for users in Pakistan remains a goal that requires further policy interventions and regulatory considerations. Federal Minister for IT & Telecom Dr Umair Saif stated in a video message that there was good news that Pakistani freelancers could receive their money through PayPal.

“We have devised a mechanism under which there would be no need to open a PayPal account. Now anyone outside Pakistan could send money through a PayPal account, and then the money could be received in Pakistani banks,” he added.

PayPal, which is an online payment system, has agreed to sign an agreement with another company in Pakistan through which freelancers will be able to receive money, The News reported Monday.

The company Payoneer — a digital payment service — will secure the money freelancers earn abroad and remit it into the recipient’s bank account in the country.

It is yet to be seen how much this company, Payoneer, will charge on its services for transferring the amount from both sides — PayPal and working freelancers.

Around 4 million freelancers operate in the country, and approximately 1.5 million work permanently. It has been considered a growing phenomenon in Pakistan, especially among youth equipped with IT skills.

The Ministry of Information Technology and Telecom also signed an agreement with PayPal to create a framework for operationalizing this arrangement. The Ministry of IT & Telecom will announce this mechanism on January 11, 2024.

Now, the freelancers could open dollar accounts but would have to retain 50% of the amount in US dollars in their accounts. The caretaker government thus fulfilled one of the significant demands of freelancers in the country.

In conclusion, the journey to bring PayPal to Pakistan continues, and partnerships like the one with Payoneer mark steps in the right direction. As the nation eagerly awaits developments in the fintech landscape, it remains imperative to stay informed and discern the nuances behind such announcements. The aspirations for digital financial inclusivity in Pakistan are still on the horizon, and every step forward contributes to the evolving narrative of the country’s digital transformation.