PayPal in Bangladesh: What’s holding it back?

Illustration: TBS

Abdullah Al Mamun, a student and freelancer based in Dhaka, launched an AI-based online service aimed to bring popular AI tools together under one platform at a lower price. The project cost him over Tk3 lakh. 

However, things took a turn when he tried to set up a payment gateway. The world's most widely used payment service, PayPal, isn't available in Bangladesh. 

Although Mamun explored other gateways, none matched PayPal's popularity. The alternatives also made payments harder for his clients, who eventually turned to competing services. Left with no choice, Mamun had to abandon the project, suffering a significant financial loss.

This isn't an isolated problem. PayPal operates in more than 200 countries but not in Bangladesh, a bitter irony for a country that ranks as the world's second largest provider of online workers. 

According to a 2023 report by the World Trade Organisation, Bangladeshi freelancers make up over 14% of the global freelance workforce.

Why do we need PayPal?

Freelancers working with international clients primarily operate in two ways: either through marketplaces or, independently. Some marketplaces rely exclusively on PayPal while others offer multiple payment methods.

"We miss out on many marketplaces simply because we don't have access to PayPal," Mamun informed us. 

Some platforms only use PayPal. But once trust builds between them, many freelancers continue working with their clients outside the marketplace to avoid platform fees. It benefits both parties, as the marketplace typically takes a significant cut from each payment.

He added that for clients in Western countries, PayPal is the most convenient option since it's widely used there. They often prefer it over other payment methods.

Another freelancer, Mir Tauhidul Islam shared a similar experience, "I was offered a full-time remote job by an American client, but the only payment option was PayPal. Since I could not use it, I had to pass on the offer." 

Can we just use an alternative platform?

"Yes and no," Mamun said. "If I switch to an alternative platform, the transaction fees are usually higher than PayPal, or it may not be convenient for the client."

In Bangladesh, alternatives like Payoneer, Xoom and bank transfers aren't as popular as PayPal. Some charge higher fees, others offer fewer features, and some are not even accessible to international clients.

"I used to flip domains—buy and sell website domains. Since I couldn't use PayPal, I had to rely on another payment method, which ate into 40% of my earnings. With PayPal, it would have been less than 5%," said Tauhid.

"The key thing about PayPal is trust," said Professor BM Mainul Hossain, director of the Institute of Information Technology (IIT) at Dhaka University. "When it comes to financial transactions, trust is everything. PayPal has built such a strong reputation that people worldwide prefer it over other methods."

However, some freelancers running agencies for international clients do manage to use PayPal, but through workarounds. They register their business using an address in the US or UK, purchase a local business licence, and get a phone number from that country.

"Once the agency is registered abroad, it operates officially as a business in the US or UK," Mamun explained, adding, "But this comes at a cost—they have to pay taxes and fees to the foreign government. Because freelancers don't have direct access to PayPal, Bangladesh loses out on valuable foreign currency."

What are the setbacks?

The launch of PayPal in Bangladesh has remained uncertain, leaving freelancers and digital entrepreneurs frustrated. Although there's no official explanation from the authorities, Syed Almas Kabir, former president of the Bangladesh Association of Software and Information Services (BASIS), believes two main reasons are causing the delay.

According to him, PayPal sees the transaction volume in Bangladesh as too small to justify launching its services here. Additionally, he pointed out that its policies do not align with Bangladesh Bank's regulations. 

Almas Kabir, who is also the CEO of MetroNet Bangladesh Limited and the managing director of AyAl Corp, shared that while PayPal hasn't officially arrived, freelancers have found workarounds through services like Payoneer and Xoom. However, these alternatives add complexity and extra fees.

Another issue is that Bangladeshi freelancers can't legally open PayPal accounts, meaning they can't send payments to foreign PayPal users either. This makes purchasing services from international freelancers a hassle.

"There's also concern about money laundering," he mentioned. Current regulations allow Bangladeshi citizens to spend a maximum of $12,000 abroad each year, monitored by Bangladesh Bank. Tracking payments via PayPal under existing rules isn't feasible, which further complicates things.

What are the initiatives taken by the Bangladeshi authorities?

Since 2017, Zunaid Ahmed Palak, the former state minister for ICT, and other officials have been raising hopes about PayPal's launch, promising freelancers it would happen soon. But to this day, there has been no real progress.

"Despite multiple announcements, I don't believe any serious efforts were made to negotiate with PayPal," said Professor Mainul. 

Syed Almas Kabir echoed this sentiment, stating that no agreements or meetings between the government and PayPal have taken place, at least to his knowledge.

Professor Mainul disagrees with the idea that Bangladesh's market is too small for PayPal. "PayPal operates in over 200 countries, some of which are smaller than Bangladesh. If they can have PayPal, why can't we?" he asked. 

He also dismissed fears of money laundering, saying, "Other countries face similar risks. We need to study their solutions and adapt accordingly."

"I am hopeful that the interim government will take initiatives to work on a solution. I believe they have the goodwill to push for it," he added. 

How might PayPal impact the current financial landscape?

It's hard to predict exactly how PayPal would impact Bangladesh, but the potential benefits are significant. "I can't give an exact number, but it's bound to boost the financial sector," said Professor Mainul.

Almas Kabir believes that local mobile financial services (MFS) like bKash or Nagad could collaborate with PayPal. This partnership could make it easier for Bangladeshi expatriates to send remittances. 

Families back home, even in rural areas, could then receive the funds through MFS providers, making the process seamless.

PayPal's launch would also benefit freelancers, giving them access to more global projects and enhancing their earning potential. The increased flow of freelance work could create more jobs, contributing to economic growth.

Despite repeated efforts, PayPal's media team did not respond to inquiries, and Nahid Islam, the advisor for the ICT division, was also unavailable for comment.