Because of these issues, Paypal will not be launching its services in Pakistan.

According to World Bank study from 2017, Pakistan has one of the lowest financial inclusion rates in the world, with just 21.3 percent of the population having access to banking services and only 14.3 percent making digital payments. This reflects the low importance placed on the digital payment environment, either as a result of the old banking mentality, such as the usage of paper for checks and balances orders, or as a response of other structural issues.

During the pandemic’s current state, the usage of digital payments and internet purchasing expanded dramatically. However, entrepreneurs, retailers, and freelancers continue to face digital payment system challenges since PayPal — a global financial channel that provides online transactions – has rejected to provide its services in Pakistan.

PayPal is an American organization that operates in around 200 regions and has 277 million registered accounts. It is the nation’s leading third-party services provider of money transaction, with high-tech multifactor authentication and a top-notch financial management system. It also enables consumers to transmit, receive, and retain money in 25 different currencies.

The Pakistani freelancing community consists of around 200,000 freelancers and over 7,000 registered small and medium businesses (SMEs), all of whom are in desperate need of PayPal services in order to do business with foreign corporations without the headache of currency exchange.

Pakistan is the fourth fastest-growing freelance market, with a 47 percent revenue increase (Payoneer, 2019), surpassing neighbouring nations such as India, Bangladesh, and Russia.

From the third quarter (Q3) of 2018 to the second quarter (Q2) of 2019, Pakistani freelancers climbed by 38%, somewhat less than India (41%).

In Pakistan, the growth in the number of freelancers is being propelled by a highly youthful population (77.3 percent of whom are under the age of 35). (Figure 3).

It has become feasible as a result of technically focused instruction accompanied by practical-indicating young people who are more involved in commercial operations.

Mohsin Muzaffer, Payoneer’s Head of Pakistani Business Development, remarked that “4G connectivity throughout Pakistan has offered freelancers unparalleled access to overseas employment.”

If 4G coverage adds to an increase in the number of freelancers, freelance incomes, and overseas employment, the availability of digital payment systems such as PayPal will aid in the quick and safe receipt of money from international jobs.

Although young Pakistani freelancers drive the gig economy, why are they unable to do business more efficiently in the world’s fourth-largest freelancing country? Why isn’t a major international payment gateway like PayPal available in Pakistan? Why do freelancers lack access to a safe and reputable payment system? Why is PayPal functional in developing nations such as Kenya, Nigeria, Somalia, Angola, Burundi, Chad, and Comoros but not in Pakistan?

Delegations from the Pakistani government have met with PayPal officials in recent years to resolve these concerns, but the company has refused to launch its services in Pakistan.

During a hearing of the Senate Standing Committee on IT, Senator Mian Mohammad Ateeq Shaikh said, “PayPal is reluctant to come to Pakistan unless there are rules to safeguard the company’s interests.”

There are also more severe reasons underlying PayPal’s unwillingness to operate in Pakistan, which are impeding the expansion and efficacy of the company’s digital payments network. To start, major international payment gateways like PayPal, Google Pay, and Stripe have zero – tolerance approach for money laundering, which is common in Pakistan due to various loopholes. Pakistan remains on the FATF’s grey list and is being watched for huge money laundering.

Second, credit cards have been the driving force behind the digital payment ecosystem, and PayPal is looking towards Point of Sale (POS) and credit card penetration in Pakistan, which is not good.

Third, any foreign corporation that wants to do business in Pakistan must pay a $2 million licencing fee, which is a large sum for businesses like PayPal, which makes 2 to 3 % each transaction, as per the State Bank of Pakistan (SBP).

Fourth, shortly after starting its capabilities in India and Bangladesh, PayPal suffered stringent limits on storing any sum in a PayPal account related to State Bank laws. Because of this worry, PayPal and other comparable corporations have been hesitant to enter South Asia, particularly Pakistan.

As an alternative to PayPal, freelancers in Pakistan must go through a time-consuming and unsafe method to conduct international internet transactions. They begin by establishing bank accounts in the United States in order to get verified PayPal accounts in Pakistan. They then connect their PayPal accounts to other third-party monetary transaction service providers, such as Payoneer and Xoom, to conduct transactions in Pakistan. These options are not as effective, dependable, or practicable as PayPal. Payoneer Prepaid MasterCard users recently lost access to their accounts due to a controversy involving the card’s issuer, a German company named ‘Wire Card AG.’

Pakistan’s government, the Ministry of Information Technology and Telecommunication, and the SBP must develop policies to launch programmes to develop and promote a culture of freelancing by offering digital payment solutions in order for Pakistan’s digital payment ecosystem to thrive. For example, to encourage domestic firms, India created initiatives such as Startup India, Skill India, and Digital India. During Q3 of 2018 and Q3 of 2019, these proposals enabled a 52 percent increase in the number of Indian freelancers and a 42 percent rise in the number of Pakistani freelancers (Figure 2).

To facilitate the integration of multiple providers, the government must fundamentally eradicate money laundering, reduce overregulation of the banking system, manage cybercrime, and upgrade the financial sector from old systems to open Application Programming Interface (API) platforms.

Under the current COVID-19 situation and devastating economic crises, it is past time for the incumbent government to start taking the right steps by creating more good terms for e-commerce and a digital payment ecosystem to enable Pakistani freelancers and traders in city centers like Karachi, Faisalabad, Lahore, and Gujranwala to join them.

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