Limitations of PayPal India are: can’t accept personal payments, can’t use PayPal balance, can’t send payment to other Indian PayPal account
Like it or not, but PayPal India has many limitations despite being the preferred method of payment for the US and UK clients. It is the most widely accepted payment method among international clients, and you have to be using PayPal if you want to be a freelancer in India.
As a freelancer, blogger, or a webmaster, it’s not a matter of choice, but it is a must to have a PayPal account.
I have been using PayPal since 2002 when we Indians had no choice to withdraw money to the bank account. One could only receive money and utilize it online with international merchants who accept PayPal. Nowadays, PayPal is the bread and butter for hundreds of small companies hiring hundreds of individuals.
For me, PayPal is one of the top channels for getting paid despite its higher fees and lower forex rates, as very few clients prefer an alternative to PayPal. Some clients now have started using Payoneer.
PayPal isn’t a bank but only a payment processor. So there are additional restrictions by RBI. Indian PayPal accounts have more limitations than ever before. I have listed the significant limitations I find quite troublesome when using the Indian PayPal account.
Can’t Accept Personal Payments
PayPal worldwide has a couple of payment options – business payment and personal payments. The good part is, personal payments don’t have PayPal transaction fees.
Non-Indian PayPal accounts can send and receive personal payments, but Indians aren’t allowed to collect personal payments through PayPal.
Personal payments were very popular in India to accept payments from clients as personal payments and skip the transaction fees.
Now, as one can’t have a PayPal personal payment, so one has to pay the PayPal transaction fees, which are close to 5% to receive payment from clients.
Can’t use PayPal Balance
Personal payments aren’t an ethically right thing to be doing, but the second limitation of PayPal India is – we can’t use the PayPal balance for payment.
The payment received in the PayPal account can’t be used for the purchase of any goods or services. One has to withdraw to the bank account only. To make a payment for any products or services, one has to pay via the debit card or credit card only.
It adds a lot of extra forex expense to accept payment and make a payment. The effective transaction fee for sending money in PayPal is close to 9%, including the credit card charges. It is on the back of a 5% transaction fee for receiving payment. Moreover, the forex rates difference can make the total cost close to 20%.
Can’t Send Payment to Other Indian PayPal Account
Indian PayPal account can pay to a non-Indian PayPal account using a credit or a debit card. Similarly, a non-Indian PayPal account can make a payment to an Indian PayPal account.
The real limitations of PayPal India is an Indian merchant with an Indian PayPal account can’t accept payments from other Indian PayPal account because payment from an Indian PayPal account to different Indian PayPal account isn’t possible.
I am not sure why this is an issue, but it is how it is. So if an Indian wants to be paying a fellow Indian using PayPal, it is not allowed.
Some of my friends who want to launch an International e-commerce site accept PayPal for international orders, but for Indian customers, they have to offer alternate payment methods.