PayPal: India ban reason
By Sandhya

Tens of thousands of Indians, many of whom are software developers, technical writers and website experts, use American site PayPal to get paid in India.  It has worked well till this month.

By early February, 2010, it was clear that PayPal had stopped personal payments and local bank transfers in India without giving any due notice to recipients in India.  Also without explanation, PayPal starting reverting some payments to senders.  There was shock and confusion among PayPal recipients in India.  America’s No. 1 tech blog Techcrunch broke the story in USA.  In India, every media giant including the No. 1 newspaper Times of India covered this PayPal debacle. Most criticized PayPal for not giving any notice before inconveniencing tens of thousands of Indians.

PayPal never gave a straight answer till today.  On Feb 10 (India time), it blogged about ‘suspending bank transfers and personal payments’ to and from India because they are ‘responding to enquiries from the Indian regulators, specifically questions on whether personal payments constitute remittances into India.’.  The services may not be available for a few months.

But the IDG News Service is reporting the true story on how PayPal stumbled.

“
The problems may have been triggered by a marketing push that promotes PayPal as a way to send money abroad, a source familiar with the matter said. The campaign—which reads “As low as $1.50 to send $300 to countries like India”—may have caught the attention of Indian regulators, the source said.
“

In the media ‘a source familiar’ means this has been leaked by PayPal itself.  PayPal, which processed $60 billion in payments in 2008, wanted a larger share of foreign remittances which runs in hundreds of billions of dollars worldwide.

PayPal has lost a lot of customers and good will by not explaining the exact reasons till Feb 10.  What was wrong in just publicly admitting that Indian regulators were not too happy with its latest remittance scheme?  By delaying the explanation, PayPal has lost many paying pals.