PayPal in Bangladesh: How close is the long-awaited entry?

Infographic: TBS

Bangladesh Bank has stepped up efforts to bring international digital payment operators into the country, opening new avenues for freelancers and businesses to conduct legitimate cross-border foreign-currency transactions.

As part of the move, the central bank introduced a framework for banks to partner with global digital payment service providers for opening dollar wallets and eased outbound remittances for travellers beyond the annual $12,000 private travel quota.

Three circulars issued recently in just 15 days relaxed restrictions on several types of outbound foreign-currency transactions.

Bangladesh Bank has already contacted PayPal, one of the world's largest online payment platforms, about entering the Bangladesh market. PayPal has responded that it is reviewing its policies, according to central bank sources.

Meanwhile, several commercial banks have started approaching global operators, including PayPal, Google Wallet and Payoneer, to explore partnerships following Bangladesh Bank's introduction of the dollar-wallet framework through a circular on 29 July.

According to the circular, banks can open foreign-currency accounts, known as Digital Value Accounts (DVAs), with cross-border digital payment service providers. Banks can settle payments through these accounts.

This means customers could potentially use a digital wallet linked to their bank to send and receive cross-border payments, including foreign-currency earnings from freelancing and online work.

Dollar wallets to benefit both freelancers, payment service providers

A senior Bangladesh Bank official told The Business Standard that the biggest benefit could be for freelancers, as they have had mobile wallets for years, but this would extend the concept to international foreign-currency transactions.

At present, more than $500 million a year flows through official channels for international payment services. The broader market opportunity, however, could be around $1.5 billion because a significant portion of freelancing earnings still comes through unofficial channels, the official said.

Bringing even a portion of those transactions into formal channels would create a substantial business opportunity for international payment operators.

The opportunity extends beyond freelancing.

"The travel-related market alone is huge – private travel, business travel, medical travel, and money taken abroad by businesses," the central bank official said. "Altogether, annual outward spending could be around $1.5 billion, give or take, and potentially close to $2 billion."

Previously, PayPal's main opportunity in Bangladesh was inward transactions. The recent regulatory changes have opened opportunities for outward payments as well, making the market more attractive, he added.

Prime Minister Tarique Rahman recently told parliament that effective initiatives had been taken to introduce the much-anticipated online payment gateway PayPal in Bangladesh and create large-scale employment through the expansion of the information technology sector.

Outbound payments eased to attract global operators

Bangladesh Bank has recently relaxed rules governing several types of outbound foreign-currency transactions.

These include travel-related payments, business expenses, freelancing-related expenses, cross-border online payments and student fees through digital wallets. In some cases, customers can make such payments beyond the existing annual travel quota.

For private travel, the annual foreign-currency allowance is $12,000. Medical treatment abroad, however, can qualify for a separate allowance of up to $15,000 per instance under applicable rules.

Previously, people often had to carry cash because they could not conveniently use international payment channels or cards for many transactions. Credit cards were generally subject to the annual travel quota.

Under the new framework, customers could potentially hold additional medical-travel allowances in dollar wallets, reducing the need to carry cash. Instead of relying solely on traditional Visa or MasterCard payments, they could use international wallets such as PayPal or Payoneer, which could potentially offer greater convenience, said a senior Bangladesh Bank executive.

Another circular allows travel operators to sell packages based on a foreign-currency limit of around $3,000 per customer per year.

Previously, tour operators could not freely make foreign-currency payments for packages involving destinations such as Nepal and Bhutan. Many such payments were therefore made through informal channels.

The new rules are intended to bring those transactions into authorised channels.

Why PayPal has not entered yet

A central bank executive, speaking on condition of anonymity, said Bangladesh Bank has been trying to make the market more attractive to PayPal and other international operators by expanding the scope for both inward and outward transactions.

"Previously, the model was primarily inward remittance. Now we are opening the door for outward payments too," he said.

According to the official, PayPal is reviewing its policy on Bangladesh, while Payoneer is already operating in the country. Payoneer's existing product structure may simply need to be adjusted to take advantage of the new regulatory framework, he said.

AKM Fahim Mashroor, CEO of bdjobs.com, said PayPal is not as indispensable as it once was because freelancers now have several alternative payment channels.

"But freelancers want as many options as possible because a freelancer may work with multiple clients," he said.

Many international clients, he added, still prefer PayPal because of its buyer protection and perceived security.

PayPal is relatively expensive, however. It can charge roughly 4% of a transaction through various fees, while several alternative platforms offer lower costs.

Mashroor said PayPal was officially approached in 2013, when he was president of the Bangladesh Association of Software and Information Services (BASIS).

"Later, a PayPal team came to Bangladesh at our invitation in 2013. We took them to Bangladesh Bank, where they met the Governor and also held discussions with officials from Bangladesh Bank's Foreign Exchange Department. Governor Atiur Rahman was also very positive about the initiative."

At the time, PayPal had several legal and regulatory concerns. After the company's team left, Bangladesh Bank issued circulars addressing some of those issues.

But in 2014, internal changes at PayPal led the company to change its strategy. It decided not to enter markets such as Bangladesh and other developing economies at that time.

"After that, not much really changed for the next eight or nine years," Mashroor said.

PayPal later began reassessing Bangladesh and other Asian markets after 2024. Around the same period, Bangladesh Bank again communicated with the company during the interim government period.

PayPal representatives visited Bangladesh around 2025, several months before the election. As the election drew closer, however, the company slowed its engagement, Mashroor said.

Even after six months of the new government, the process has yet to move forward significantly.

"It is not that there is some legal or policy gap preventing PayPal from entering Bangladesh. At least, they have never told us, even informally, that there is a specific regulatory gap preventing them from coming," he said.

PayPal has already moved forward with at least one or two banks in Bangladesh, he said, because the company would need local banking partners to operate in the country.

Bangladesh already handles billions of dollars in cross-border remittances, while local banks work with major international payment platforms, including Western Union.

"So, in my view, there is no major technological limitation on the Bangladesh side, nor is there necessarily a legal limitation," Mashroor said.

"I think it is primarily an internal matter within PayPal."

Banks exploring partnerships

Commercial banks are also beginning to explore the possibilities created by the new regulatory framework.

A senior executive of a leading private commercial bank told TBS that his bank is currently assessing what kinds of products and partnerships could be developed under the new circular.

"At this stage, we are only exploring the scope. We want to understand how we can initiate discussions under the new circular: what products can be introduced and what kind of arrangements are possible," he said.

For such arrangements to work, banks would need agreements with PayPal, Google Wallet or other international wallet providers.

"The bigger question is what kind of arrangement the international wallet provider wants to have with us, because many of these companies are not officially operating in Bangladesh yet," he said.

The partner does not necessarily have to be PayPal. It could be Google Pay, Google Wallet or another fintech platform. Other potential partners include Payoneer and Wise.

But banks will also have to assess the risks associated with each platform.

"Their risk ratings are not all the same. Whether banks will accept all of them is also an issue. We need to consider how safe it is to work with a particular platform," he said.

Settlement arrangements will also need to be worked out, as there could be several possible settlement structures.

Bangladeshi freelancers already working through Payoneer, PayPal, Wise and similar platforms maintain accounts with those services and accumulate their earnings there. If the dollar-wallet framework becomes operational with international partners, they could potentially bring those funds into Bangladesh through formal banking channels.

PayPal's enormous global market share makes it particularly significant for freelancers. Many international businesses and services are already connected to the platform.

But Bangladesh Bank's circular only creates the regulatory opportunity. PayPal itself must still decide whether it wants to enter into an arrangement with Bangladesh, the banker added.