PayPal is an American multinational financial technology company offering online payment systems to send, receive and manage money securely. Established as Confinity in 1998, PayPal became a wholly owned subsidiary of eBay in the year 2002. It became an independent company again in the year 2015. PayPal operates in over 200 countries and supports more than 25 currencies. The company is headquartered in San Jose, California, United States.
PayPal facilitates online purchases, peer-to-peer transfers and in-store payments through QR codes or PayPal Debit Card. It also offers multiple business solutions, including payment gateways, invoicing and subscriptions for e-commerce. PayPal Credit offers a revolving line of credit at thousands of vendors accepting PayPal. The company enables buying, selling and holding select cryptocurrencies like Bitcoin and Ethereum. PayPal had 429 million accounts and processed around 25 billion transactions by 2024.
Status in India
PayPal is not banned in India. It operates in India under certain restrictions by the Reserve Bank of India. PayPal does not allow domestic payments and peer-to-peer transactions in India. The services of the platform in India are limited to receiving international payments in compliance with the RBI’s Foreign Exchange Management Act, thereby allowing exporters to receive money from abroad, and sending money to foreign merchants for international purchases.
PayPal ceased its domestic payment gateway operations in India from 1st April 2021 onwards. In a statement announcing the same, the company said that its payment services for cross-border trade would continue in order to enable more international sales for Indian businesses. PayPal had launched domestic payments for Indian users in 2017.
While PayPal did not give the reasons for discontinuing its domestic payment operations in India, industry experts pointed out regulatory challenges faced by the company and intense competition from India’s own Unified Payment Interface or UPI system as possible reasons.
Regulatory Challenges in India
In the year 2011, the Reserve Bank of India banned all kinds of transactions through PayPal for violating the Foreign Transactions Act, 1999. Later, RBI allowed PayPal to operate in India under certain conditions and guidelines. The major guidelines include non-recognition of PayPal as a banking institution which prohibits it from holding users’ money for more than 24 hours, transaction cap of $10,000, mandatory PAN card registration for PayPal users and only credit/debit card for paying through PayPal.
In December 2020, the Financial Intelligence Unit, operating under the Union Ministry of Finance, imposed a penalty of Rs. 96 lakhs on PayPal for failing to register itself with the FIU, in violation of the Prevention of Money Laundering Act, 2002.
