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Paypal, internet banking systems use wrong kinds of sockets, plugs

Globalisation? They've heard of it
Sun Aug 01 2004, 09:46
LAST MONTH, Paypal, the money transfer, or "e-payments" subsidiary of auctions behemoth eBay, announced that it was now possible for account holders throughout South America to receive money, not just send it. This was one of my main gripes with Paypal, as it was only good to drain money from my savings and it was worthless for fattening my wallet with bountiful INQUIRER cheques.

"Now, Receive Money With Your PayPal Account" the headline read, so I clicked on the e-mail from Paypal with some scepticism, as the offer seemed to good to be true. "Dear Fernando, you're now able to receive funds with your PayPal account, so there's no need for you to wait for paper checks or money orders. Get paid through your PayPal account and start receiving money from over 45 Million PayPal users", the good news message started.

It continued telling me that I could now "use PayPal to Receive Payments Quickly, Easily, and Safely" and use it to "sell goods locally and internationally". Not only that, the ended by saying "Now that you are able to receive payments through PayPal you can automatically accept payments in US Dollars, Canadian Dollars, Pounds Sterling, Euros or Yen, helping you reach a wider customer base. PayPal makes it easier and safer to sell on sites like eBay and online throughout Europe, North America, Australia and Asia".

The rosy story ended in tragedy once I read the fine print: If you log-in into your Paypal account, go to Help, Non-US accounts, and then on the question "how do I retrieve money from my paypal account?", this should take you to a web page that states "For Anguilla, Argentina, Brazil, Chile, China, Costa Rica, Dominican Republic, Greece, Iceland, India, Ireland, Israel, Jamaica, Luxembourg, Portugal, South Korea, Taiwan: You can withdraw funds from your PayPal account by requesting an electronic funds transfer to your U.S. bank account".

Excuse me? An electronic funds transfer to my bank account where? Yes, they apparently expect people in South America, Asia and even Ireland to have bank accounts in the USA. Why didn't I think of that! I forgot for a minute that in the mind of some execs, the world revolves around the US. Have they considered that after 9/11, the chances of a non-resident getting a US bank account - if you decide to go through the cost and the hassle - are slim at best?

Paypal is an eBay subsidiary. eBay has associated with a local auction site, MercadoLibre, where the ebay logo is displayed prominently alongside the local auction site's one. So why can't Paypal do some sort of agreement so their local associate issues a cheque and mail it locally (or deposits funds) when the Paypal receiver account is located here? I'm using my particular case as an example, but it applies to p Paypal users throughout Latin America, Asia and to other territories as well. When it comes to sending money (also known as "draining my bank account") Paypal does an exceptional job and I haven't got a single complaint about them. But when it comes to receiving money, people outside the US and most of western Europe are the pariahs of the money-transfer universe. Some Americans are apparently not as happy as me since they started sites like

The money transfers market needs some serious kick where it hurts

With a distributed crew of hacks spread throughout the world, our editor-in-chief can give testimony of the pain and hassle of international payments, like when our Nova yells at him because he is unable to cash the UK cheques, or when I have to pull my few remaining hairs out and accept being robbed at gunpoint by the money exchange services - it's a metaphor - to get my cheques cashed and the cash in my hands 30-40 days later.

Oh! the joys of the developing world. Down here, for instance, it's not uncommon for bank accounts to charge you a fixed $75 greenbacks fee to receive a money transfer from abroad over SWIFT. And if someone from Euroland happens to send one a cheque in their local currency - it doesn't matter if it's Euros or £GBP, the armed robbery gang at the currency exchange services usually charge you, in the best case, a more "modest" $30 USD per cheque, plus a two to three per cent cut.

The two big money-transfer companies, Western Union and Moneygram, aren't much better, with their rates being comparable, or worse, to what banks charge for milking both ends of the money transfer. A late 2003 article on paper-based magazine BusinessWeek said: "It's no secret why Western Union is coming under pressure. Commissions on most transactions run 10% or higher, making Western Union a most reliable profit generator for its Denver parent, First Data Corp. (FDC ), which acquired it in 1995", enough to give the company a "more than $1 billion in operating profits on revenues of more than $3.5 billion".

According to the same article, Western Union "controls 80% of the market in regions such as Latin America". The company has also the nasty habit of not letting you know its service charges in advance, or displaying them, until you actually do the money transfer, paving the way for some surprises and blood pressure hikes.

The Paypal e-lternatives
Of course the Paypal restrictions have given birth to a dozen Paypal-wannabe sites, among the most notable the
UK based Moneybookers which seems to be a great deal if you live within the €uropa. There's U$A based, but which for people in remote corners of the world, only offers the options of a cheque or money order to withdraw your money from your virtual account.

iKobo, based in Georgia, USA, which has an innovative deal, issuing you a Visa Electron debit card from their partner banks off the island of Antigua. Yes, I know what you are thinking. But I have tried it two times and it worked, as I got the money in my hands from the nearest Visa Plus ATM. But the service is not without its share of customer-care problems and paranoid anti-fraud measures which can make you block your own account and/or make the person sending you money very nervous. I relate some of these experiences on my own web site. Then there's Yahoo/HSBC Paydirect here. This service mimics Ikobo, but the debit card you get is a Maestro, the debit version of Mastercard. It would be great, if HSBC execs extended it outside the USA. When you read the fine print of the Paydirect service, or attempt to sign-up, you quickly realise that it's good for legal US residents, as entering your social security number is part of the process. There is a Yahoo Paydirect UK as well, but apparently it seems to be of use only to transfer cash within the UK.

Since Paypal is useless for local sellers, one small banking firm, Banco Privado, has started his own e-payments service, dubbed " DineroMail", currently operating in Argentina and Mexico, and which promises to expand to Brazil and Chile soon. The joy stops when you look at their rates, however, you will quickly realise that while withdrawing money to your bank account is free, the service takes a whopping 3.86% cut of each transfer you receive, plus a 36.30 pesos (~$12 dollars) monthly fee for "DineroTools". The great irony is that DineroMail is being widely used on MercadoLibre, eBay's local auctions affiliate, and that Paypal is an eBay subsidiary.

The situation with Paypal and the other money-transfer alternatives for local customers throughout South America and Asia is so bad -remember the Paypal requirement of having a local USA-based bank account to withdraw the money, that it's no wonder that friendlier alternatives are appearing to give the services that these local communities are craving.

The perfect service, however, has yet to appear, as hundreds of posts on the forum seem to imply, showing shortcomings of just about every one of the mentioned services (but one should always try to separate the real from plain " astroturfing" from disgruntled competitors).

Hey, Paypal management, you know there's people outside the USA that do *not* have a USA-based bank account? How about thinking about the rest of us? µ

Mike Magee writes: Yes, I can confirm Paypal's ways and means committee has, how can I put it, some rather Byzantine habits. Some of Breakthrough Publishing's US customers pay for advertising into our Paypal account. Unfortunately, even though the INQ has a US dollar account with HSBC here in the United Kingdom, Paypal says it's impossible to transfer any dollars in the account to this dollar account. You can exchange the dollars into UK pounds to transfer into a UK bank account, but as the exchange rate is not too good right now, that would be a daft thing to do. The Paypal call centre tells me that I can, however, open a US dollar account in the US, with a US address. Or I can get an Amex card, and transfer the dollars into that.

What about Worldpay, I asked? Is there intermoney transfer between those organisations? Paypal claimed it had never heard of Worldpay, which will probably come as a surprise to HSBC. We use Worldpay to process the INQ's subscription service.

Why does it matter? The INQ's distributed model means that we have freelancers working in different countries all over the world. Because of recent money laundering legislation, transferring cash by the Interbank system is much harder than it used to be. If you thought problems with different sockets and plugs was confined to computers, believe us, that is a dream in the 21st century compared with internet and inter-banking systems.


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