Small Business Stuff Chat about SMME issues

FNB/PayPal – A Failed Opportunity

SA has once again managed to turn a prospective Golden Goose into tough old turkey that is best left alone.

A link-up between FNB and PayPal, the online payment portal was announced today.  It gave me little pleasure.

What we expected was a gate-opener to local and international on-line trade.  Saffers would be able to buy through the on-line banking payment portal of a local bank, with the comfort of the world’s largest payment facilitator ensuring high-quality global user comfort. 

For merchants PayPal would allow us to set up international shop-fronts with low transaction charges and remit the cash back to our local bank accounts.

For the Reserve Bank and SARS it would give them the opportunity to track the currently invisible off-shore on-line trade and tax it.

What we got was not even close.

Today’s announcement was more about Exchange and Bank Controls than about opening the sluice gates for International on-line trading.

First, and saddest, you cannot link PayPal with a business account. Only personal accounts. Puts most SMME merchants right out of the game.

Your local SA PayPal account will be denominated in US Dollars. There are probably two reasons for this.

1. Without partnering with FNB, PayPal would need a local deposit taking licence to operate local accounts. They don't want the time and hassle of acquiring one.  The PayPal account, while called an SA PayPal account, is probably held on American servers.  Hence the dollars.
2. FNB don't want you to be able to buy and sell online between PayPal accounts without passing through your FNB account on the way. They don't make anything on direct trades. So, the sales prevention team have decided to denominate the account in dollars and only have dollar buy-now buttons on the PayPal interface.  The simple lack of a rand buy-now button makes PayPal useless to all intents and purposes for internal SA trade.

You have 30 days to transfer your money back to South Africa. You can’t keep the money in your SA PayPal account as a wallet … that would be in contravention of the Reserve Bank Regulations and FNB’s Terms of Service. You will be responsible for making sure the money comes back in time.

Each transaction must be uniquely identified. Every detail about the sender, receiver and the transaction will be reported to the Reserve Bank. No more avoiding VAT and duty.

South Africans will not be getting the full PayPal implementation. We can send and receive money but will not be able to use the buy-now buttons in South African Rand. 

You will have to use a second merchant gateway to handle rand transactions. Why use PayPal at all then ?

FNB will be adding 1.5% onto the transaction value. This, coupled with PayPal.com’s 3.4% + R2.10 per transaction, takes us to about 5% – which means that one of PayPal’s most attractive features – the low transaction fee – is negated for South Africans.

Sorry Folks, but this is a another prime example of the Victorian approach to banking and e-commerce that hamstrings 21st century trade in SA.