I read the TechCrunch article yesterday about Paypal limiting payments to merchants in India to $500 beginning March 1st, and I think it will make an impact on the domain business. If merchants need to accept a higher payment amount, they need to look elsewhere. The restrictions have been put in place by the Reserve Bank of India rather than Paypal, and it was announced on the official Paypal blog yesterday.
In my opinion, this news could be very bad news for Indian domain investors and could also be a big annoyance to others who live outside of India but who do business with Indian companies.
For just about all transactions that are under a few thousand dollars, I use Paypal. From my perspective, this limitation would pose a problem for me if I am buying a relatively low value domain name for a domain investor in India. The cost of using a service like Escrow.com might be prohibitive on a low value deal (but above $500), yet the seller wouldn’t be able to accept a Paypal payment.
Similarly, for web development projects, it doesn’t appear to be possible to pay Indian merchants more than $500 via Paypal. I’ve worked with companies in India (found on Elance), and this would impact them, and consequently, it would impact my business.
Unless I was buying a domain name or working on a significant project that was critical to my business, it would be highly unlikely that I would opt to use another payment service like Western Union or something else.
Last night, I spoke about the Paypal situation with Andrew Allemann, who works for Indian-based Directi, the company that operates Skenzo, Big Jumbo, DomainAdvertising.com, and others. According to Andrew, his companies “use a payment processor for all of our payments, and this payment processor won’t be affected by any of the changes.” That’s a bit of good news.
If you are doing business with merchants or domain investors in India, you need to be aware of these Paypal restrictions that are coming soon and make sure you and they are covered.
Do you know if every freelancer site pays out with paypal? This leaves a nice hole for some new player in the area to move in (google checkout maybe?)
Not sure, but I’ve met a couple companies from India and have worked with them outside of Elance after a successfully completed project.
There are many alternatives to paypal.
Something like Western Union or moneybookers…..
Hi Elliot!! Raman here. I am from India and I’m domain investor. I use paypal for transaction above $1k. RBI has restricted norms, I am very sad. I will choose escrow now.
It is not only India, other countries are following suit like Malaysia/Indonesia.
Why—-to prevent money laundering.
US will be looking into this issue too.
Paypal is not regulated by the FDIC or any regulations.
Do you know you can send >10kUSD via paypal and not file the paper work requirement?
It has nothing to do with restrictions by RBI. It is other way round. Read the article which tells us that it is PayPal which is screwing the Indians. :
Thanks Elliot for the informative post.
Reserve Bank of India has imposed some restrictions on Paypal since it is not a banking entity and thus not entitled to give interest on money retained with it nor report transactions falling under the money laundering definitions.
It certainly puts a big spanner in the works but payment by cheque or merchant processors should circumvent the problem to a certain extent but the small players would definitely feel the pinch.
Hope Paypal works out something with the RBI since the larger issue of internet commerce is at stake.
It creates a colossal pain in the ass for anyone sourcing development work from India.
I really don’t source from there much anymore, but occasionally, it is cost effective to hire a $5 hourly guy to perform certain ‘menial’ coding tasks, then just put my Eastern European guys on the job to tidy it up once the grunt work is done.
Do we know how they intend to handle benchmark payments, etc? For example, how would they prevent someone from just smurfing a series of $400 payments to effect a $2000 transaction?
This will forse more deals to go via brokers and brokers will provide smart packages, when buyers “push” by 500, and then sellers pull by 500 in pieces.
If there is a need, there is a way.
I have been helping people in India solve the Paypal problem through setting up a Hong Kong company which has a Hong Kong bank account tied to a Hong Kong Paypal account which can be operated remotely by the user in India.
Try moneybookers.com, set up a personal account. no deductions, fixed small fee for transfer, and no ‘preconversion’ into rupee – (all ingenious ways invented by Paypal to screw customers).
The company I work with deals only in PayPal…Its a UK based company and employees working outside UK are paid salary through PayPal only…
Now my question is : does this $500 limitation apply to funds received in GBP? I mean will PayPal convert amount received in other currencies to $$$ and then if its more than $500 block your account?
It sucks big time. how do we do business. can anyone suggest any alternate? i cant use escrow for $800 deal. pl help. My income has dropped 95%
My Solution to Paypal – RBI issue.
I am Suresh Nair from Kerala. I have been using Paypal for the last 8 Years. They are one of the best payment processors. I cannot compare paypal with other payment processors like clickbank, 2checkout etc, because most of our sales are processing by Paypal. I have provided 2 payment options and 95% of them are choosing Paypal. So I cannot think about an alternative. The recent issues are because of ‘outdated’ guidelines from RBI. First of all, paypal is not a bank but a payment processor. So they have to make new rules/guidelines for payment processors.
Because of the new guidelines, we are facing the following issues:
1) Not able to use paypal fund to pay for domain, hosting, advertising expenses.
2) Not able to accept big amounts like USD 10,000 at a time, so we create multiple invoices for the same transaction.
3) Not able to process immediate refunds. Because, auto withdraws make the account empty. When somebody post an issue in paypal resolution center, they cancel the previous withdrawal and automatically deduct the foreign currency transaction fee. This is nearly $1.5 for every thousand rupees. This has already happened several times.
2 months back I found a real solution to this problem: I became an NRI and all the problems were solved. I registered a business in Malaysia and I have a Paypal account which is attached to my Malaysian bank account. Then the fund will be transferred to my Indian (NRE) account. No worry on paying Income taxes here in India since I am now an NRI and NO income tax in Malaysia for foreign income.
So Paypal doesn’t suck, but RBI sucks!
i have verified paypal account with credit card and bank a/c on file.
what is my credit limit for sending and receiving money? its doesnt show up in my account.