PayPal in Pakistan

Published: May 6, 2010

The writer is chairman and CEO of Naseeb Networks (monis.rahman@tribune.com.pk)

When I told venture capitalists in a boardroom in Silicon Valley’s infamous Sand Hill Road that Pakistan was the third fastest growing country of internet users in the world, sceptical glances spread through the room. I told them we had set a new global record in terms of mobile subscriber growth — from three million connections to 90 million in six years. Clearly, this side of Pakistan vastly conflicted with images they routinely saw on Fox News.

Gross misperception about realities remains a big obstacle to investment. Sami Hinedi, Wi-Tribe’s Global CEO out of Bahrain was asked by a foreign fund manager why Pakistan needed wireless devices in homes when antennas on rooftops should be good enough for a “third world” country. Sami responded, “You have not been to Pakistan.” Pakistan’s rapidly growing community of 18.5 million internet users has high expectations. They are flocking to the net looking for jobs, creating blogs and reading the news. Last December Pakistan clocked in as the eighth fastest growing country on the popular social networking website, Facebook.

But despite these juicy statistical tidbits I have been feeding you, all is not peachy. While over $1 trillion will exchange hands around the globe this year through internet payments, Pakistan’s e-commerce pipes are conspicuously missing. Only a handful of businesses can process credit card transactions through the internet because online merchant accounts are like unicorns here. Citibank is the only bank in the country that offers the service and one has little chance of being approved.

This leaves our affluent and rapidly growing online user population significantly under-served. I was excited after learning that PayPal was interested in “exploring opportunities in Pakistan” during a Skype call with their general manager of South East Asia back in January. Around 10 per cent of the world’s internet transactions are processed by PayPal.

By the time you finish reading this article, it will have processed over Rs110 million — that’s $2,200 per second. In 1999 I was at a Silicon Valley party when Luke Nosek, one of PayPal’s co-founders, offered to wirelessly “beam” $5 to my PalmPilot’s infrared port. I gladly accepted Luke’s offer, which he repeated several times during subsequent social events out of excitement and perhaps beverage-induced euphoria. Instead of being smug about the $20 I got from Luke, I should have been investing in his company.

PayPal was bought by the auction site eBay for $1.5 billion in 2002 and Luke disappeared to the Greek Islands. Since then PayPal has transformed itself from a handheld device payment service to one of the world’s largest payment processors, giving Visa a run for its money. Whether PayPal decides to enable internet transactions in Pakistan is anybody’s guess. I suspect the first battle will be internal with their legal and compliance teams.

Fears of enabling terrorist funding, money laundering compounded by instability must be overcome by realising that Pakistan has the all the ingredients of an ideal emerging market which is why both Western Union and MoneyGram opened up shop here. The global story on terrorism tends to be the prism through which international media filters Pakistan related news. The biggest obstacle is convincing John Smith in legal to stick his neck out. He needs to stop watching Fox News.

If you only hear about bomb blasts, you tend to think that’s all that’s happening. The distorted perception is pervasive. Unfortunately, sometimes perception becomes more important than reality.

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Reader Comments (37)

  • riaz ahmed
    May 6, 2010 - 12:50AM

    a company that launched and re-launched ‘lottery’ with different names in Musharraf’s era invested about $20 million, but before it did that it paid about $2million to the military generals and had Shaukat Aziz Prime Minsiter on its payroll, so investment is always possible in Pakistan.Recommend

  • May 6, 2010 - 1:37AM

    Monis,

    I think you are head on about the first battle being with their internal compliance departments. I am not sure if you followed the recent fiasco they had in India. They had reversed thousands of transactions without any notice just because banking regulations in India changed.

    I think PayPal will try to mature markets like India before thinking about Pakistan.

    On the other hand, PayPal doesn’t have much time. AliPay is already giving them a very tough time in China by being the major processor of online payments there. May be we will see AliPay entering our market even before PayPal does. Plus there are local networks like Amaana that have trying for quite a few years but have not been able to establish themseleves.Recommend

  • May 6, 2010 - 2:17AM

    monis:

    agree here: The distorted perception is pervasive.

    regulatory controls, laundering, fraud, security…these are the main concerns…and they are bridge-able.Recommend

  • Aftab Malik
    May 6, 2010 - 10:09AM

    As rightly pointed out, Pakistan needs companies like paypal to make many of our small businesses financially viable. It is good to see that paypal has atleast identified some of the right people who actually know what they are talking about to understand the Pakistan opportunity.Recommend

  • bilal anwar
    May 6, 2010 - 10:12AM

    “Perception is sometimes more important than reality”. Quite true. I’m sure this whole Faisal Shahzad incident will not help matters. Americans hear 2% about Pakistan 98% of the time.Recommend

  • Muhammad Shabbar
    May 6, 2010 - 10:18AM

    Interesting article, I don’t know Mr. Moonis Rehman and his connection with the silicon valley, I think in Pakistan things are happening in their own way, many telecos are working aggressively on e-banking and many products have already hit the market, unfortunately terrorism and corruption seems to remain obstacles of our society and nation. Recommend

  • Saad Munir
    May 6, 2010 - 10:50AM

    Amazingly, freelancers are still struggling and are growing enormously in Pakistan, despite of the fact that they have to bear the transaction costs and stuff. Recommend

  • May 6, 2010 - 11:02AM

    Pakistan Badly needs Paypal ! Pakistan has Humongous potentialRecommend

  • May 6, 2010 - 11:13AM

    Very well written indeed, I wonder if we have any figures available for the transaction volumes done by MoneyGram and Western Union for Pakistan? The amount would be an eye-opener for the Paypal authorities. Furthermore, the monetary stats for Pakistan’s local banks via e-Banking would also add value to the figures. People and businesses in Pakistan do require a good payment processor, I’ll be happy if it turns out to be PayPal.Recommend

  • May 6, 2010 - 12:19PM

    When its coming to Pakistan?Recommend

  • Tayyab Raza
    May 6, 2010 - 12:28PM

    encouraging..Recommend

  • Nooruddin Muzzaffar
    May 6, 2010 - 12:42PM

    I agree with Monis. First things first, there is a perception issue where the negativity from every corner is so rampant about Pakistan that the good things are simply getting ignored.

    I can safely assure there is a wide ranging talent pool emerging out of everywhere within Pakistan working as freelance writers, designers, developers, coders, etc. that would love to have Paypal available in Pakistan because that would add to their productivity, results and growth by leaps and bounds. For those who don’t know much about how the internet payment systems work, this might not be a big deal, but definitely having Paypal in Pakistan would make a great difference!

    Also, regarding Paypal, I’ve been listening and reading stories stating reasons of not entering into Pakistan leading the lists all the way to Zionist lobbying! As fascinatingly true as it might sound to some, the fact is things are far simpler: Keep Improving the economics of operations in Pakistan (more service providers, more skilled freelancers, etc.) and keep approaching the company through various Pakistani organizations (leading web based businesses, business associations, etc.) in an attempt to convince the company and we’ll see results.

    After all, there are comapanies investing in war zones in the world too, of course we are a million times better than many. Recommend

  • GIbran Ashraf
    May 6, 2010 - 1:03PM

    Some industry insider told me that the legal financial structure in Pakistan did not offer companies like PayPal the securities it needed to start operations in Pakistan. We do need a collective campaign to start getting people behind a movement to bring companies like paypal.

    I go to amazon.com, search out a great deal and am almost about to purchase it when i realize that a) they do not deliver to Pakistan. to India, Afghanistan, Bangladesh, but not to Pakistan.
    b) the aforementioned payment issue.

    Whose got a citi card??Recommend

  • May 6, 2010 - 1:06PM

    Important issue raised. It’s good to see that local media has started to take interest in the issues facing the internet based businesses in Pakistan. Payoneer Mastercard service is also shutting its service in Pakistan, which is a bad news for Pakistan. In my view rather than waiting for Western financial institutions to ‘approve’ us we shall compel our local banks to introduce internet payment solutions. If the local financial industry is not willing to back us then what to expect from others? Recommend

  • May 6, 2010 - 1:10PM

    looking forward for Paypal to be installed very soon. But as far as i know its only STate bank not allowing third parties to install their affiliation with current banking system.Recommend

  • Zun
    May 6, 2010 - 1:21PM

    I am glad to know, PayPal is at least thinking of coming here. But as far as I know, SBP stopped giving out merchant accounts, as there are many security issues one faces, which need to be countered first.Recommend

  • May 6, 2010 - 1:51PM

    Really great piece. Recommend

  • Quratulain
    May 6, 2010 - 2:01PM

    Over the weekend I received an email from Payoneer (they issue prepaid MasterCards) stating that certain countries have been listed by US govt as having strategic Anti Money Laundering (AML) deficiencies, hence if the card holder is residing in Angola, Ecuador, Ethopia, Pakistan, Turkmenistan and Sao Tome and Principe then they need to withdraw funds by May 31 2010.

    Notice how we manage to make the cut in this list? It is no surprise that online payments and e-commerce options suffer as a direct consequence of such bans. The only reason Citibank has managed to open an online gateway is because they happen to split the fee for the payment gateway with over 30 countries in the region. With a high fraud index they can simply not risk it. And no i am not an employee or spokesperson for Citi rather someone who has been in this business for a greater part of my career.
    Over the years I have seen MCB and SCB show an interest in investing for the electronic payment gateway (there is a separate annual fee for it which is in thousands of US dollars), they have turned tail everytime.

    However, all is not lost. Within Pakistan, Moneybookers is allowed – thankfully. While it is not as widely accepted as PayPal, atleast there is a start for those who hope to start an online business. Recommend

  • May 6, 2010 - 2:14PM

    right on the head, hit on the nail Monis. They think Pakistan is in stone age…. I think Pakistan needs its own infrastructure linked up like any bank is to Visa or MasterRecommend

  • May 6, 2010 - 3:25PM

    worth reading, why don’t some strong group like Naseeb start PPP [PayPalPakistan] or something like this…? Recommend

  • May 6, 2010 - 4:20PM

    although paypal is not available but moneybookers is working for most of the pakistani banks and for online payment through Pakistan and it is one of the competitors in this sector. We can always give it a try Recommend

  • Zeeshan Sarwar
    May 6, 2010 - 4:27PM

    We need our State Bank and financial industry to grow some hair on their collective chests and launch an indigenous solution. Why wait for our easily spooked foreign friends to muster up enough courage to enter our borders? The problem is that most of our senior banking executives and regulators still have their heads up their arses and haven’t figured out the national importance of online payment processing. Thanks for highlighting this Mr. Rahman, great article.Recommend

  • May 6, 2010 - 4:50PM

    The biggest obstacle is convincing
    John Smith in legal to stick his neck
    out. He needs to stop watching Fox
    News.

    So can the common Pakistani internet user do anything to help a rethink? Countless online petitions etc. have been signed, but that approach seems to be a dead end with no tangible progess. Is there any initiative that the Pakistani web community can take which might catch Paypal’s eyes? The legal or financial concerns are probably beyond the common user’s sphere of influence. That would require the govt.(s), the banking sector etc. to take some steps both here and in the US, but is there anything that the normal Paksitan user/freelancer can do to influence a policy change?Recommend

  • May 6, 2010 - 6:09PM

    Great Write up …. but kinda misleading … :D but then again its a NORM on web to mislead a little. I thought I was gonna see some insight on paypal coming in Pakistan , but I guess that was the last thing discussed here ..

    Anyways loved the information and writing style.

    Cheers // TirmiziRecommend

  • May 6, 2010 - 11:18PM

    I don’t think terrorism and Pakistan’s image in west is a problem at all for PayPal coming to Pakistan.
    If those were the real reasons, then why would McDonalds, KFC, Pizza Hut and Hardees would come to Pakistan? The chains are at more risk as they are open to public, while PayPal’s business will be entirely different.
    I sent an email to PayPal a long time ago and they mentioned financial laws as the sole reason for their absence in Pakistan.
    If they have favorable laws, I bet they can open an office in Waziristan too.Recommend

  • Abdul Rahman
    May 6, 2010 - 11:33PM

    we need paypal in pakistan for sure..but cant pakistani banks create something like paypal to take payments online while beign in pakistan and doing business online?? there is one more option which is 2CO.co.uk but they charge too much…Recommend

  • May 7, 2010 - 12:08AM

    5806 Pakistani Knowledge Workers, Writers, Web Designers, Web Developers, Software Engineers and Contributors comprising of Youth and Women have gathered on Facebook under the cause – PayPal Authorize Pakistan Now Campaign – Website URL http://www.causes.com/causes/266093 and this signifies the demand and need of the Pakistani Information Society to be included in the global Knowledge Economy. Denial only means that there are greater forces out there that do not want Pakistani Knowledge Workers to improve both the social and economic condition of the country that other regions around Pakistan are entitled to. PayPal wake up!Recommend

  • Aariz Memon
    May 7, 2010 - 1:49AM

    Internet growth and software industry are two different areas. Though, net users have surged in the country but software industry depicts dull picture. Foreign exchange and revenue can be generated by improving the software industry.Recommend

  • Adeel Janjua
    May 7, 2010 - 10:54AM

    The self-importance in this article is nauseating. I hang out with CEO x and y. Hence, you should listen to me. The article misses the point. Businesses are philanthropic organizations. What misperception? Are you blind or deaf? al-Qaeda and Taliban are operating out of Pakistan. Denial is not a river in Egypt, I suppose. Recommend

  • May 7, 2010 - 1:40PM

    I believe 80% of our focus should be to actually improve the reality of our current situation. The problem is that in terms of regulations, money laundering laws, compliance, enforcement, forensics and the judicial system to address financial issues and disputes are in fact very poor and broken in Pakistan. Forget the multi-national companies, even the local companies / Pakistani investors are afraid to do business in Pakistan. This needs to be fixed at high priority and I understand it may be a 10-year process but I believe there are no quick fixes and short cuts.

    Secondly, 20% of our focus should be on improving our image. Yes, there is a lot of room for improvement in this space, like monis mentions in his article, however, I believe this is much smaller problem.

    Finally, I’m always more in favour of looking for local solutions to our problems compared to looking for outside solutions. I mean if the e-commerce market of Pakistan is so fantastic, then why doesn’t a local company come up with a payment solution for it? But I’m afraid the answer is in the 80% section that I talk about above.Recommend

  • Saima Chaudhry
    May 7, 2010 - 2:28PM

    @Adeel Janjua since when are businesses philanthropic organizations?? Someone appropriately said above that the world hears 2% of Pakistan’s news 98% of the time. You are perpetuating that. Unfortunate. Bon sante.Recommend

  • Ahmed Qureishi
    May 7, 2010 - 4:58PM

    Brilliant Monis! I agree 100%.Recommend

  • Hajra Fathi
    May 8, 2010 - 6:24AM

    If all you are seeing in Pakistan is Al Qaeda and Taleban, you either live in downtown South Waziristan or are being misled by media. I have lived in Pakistan all my life and have never seen these creatures, so why should they be how I am defined by the West?Recommend

  • May 8, 2010 - 10:06PM

    I thought this was about ‘PayPal finally coming to Pakistan’ Anyways well written. Recommend

  • May 12, 2010 - 10:31PM

    Dear Monis,

    Don’t take up the the matter up again with SV as it is adding to our miseries.

    The Payoneer Card which was accepatable for sending payments in Pakistan stands blocked. Thanks for taking up the matter.

    Note: If you keep on insisting for PayPal, I bet Moneybookers too could be blocked due to AML (Anti Money Laundering)Recommend

  • Haroon
    May 13, 2010 - 10:24PM

    Forget about Fox news or Taliban etc, I have heard that our very own “State Bank of Pakistan” does not allow paypal to enter in Pakistan for any unknown fear in their heads, otherwise paypal is interested in stepping in. Recommend

  • shakeel
    May 14, 2010 - 11:13AM

    We should all contact with SBP to take action on paypal / ebay system in Pakistan. Simply one e-mail from millions of Pakistani Recommend

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