Has PayPal given you problems yet?

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One lakh seventy thousand Indians regularly receive or send money abroad, through the online banking website PayPal. Actually, about 1.6 million Indians are signed up for the service, though not all of them are regular users. That's according to Anuj Nayar, Director of Global Communications, at PayPal.com.

Someone like me, who holds a regular job, pays off loans through post-dated cheques and visits the downstairs ATM when I need cash, wouldn't know what to do with that sort of info.

But my brother works part-time as a Korean language interpreter and translator and finishes most projects online. He'd be interested. Actually, when I started asking around, I found a whole bunch of people who earn a living off the web.

Photographers, artists, musicians display and sell their work online. Bloggers and some journalists are paid by foreigners to write columns. Website owners get money for the ads displayed on their sites. Engineers write software for foreign firms, in their free time. There's plenty of folk, once you start looking for them.

Which brings me to why I'm penning all this down, right now. A month back, the Reserve Bank of India ordered PayPal to stop activities in India, until further notice. Newspaper and TV channels didn't pick the story up but online, Indians complained about their accounts suddenly frozen, payments arbitrarily sent back to the sender and general mayhem in their business schedules.

Today, everything's more or less back to normal. Senior bloggers I spoke to say their payments are now flowing just fine. But with my brother now trying to figure out what's safe and what's not, I tried to find out a bit more.

OK - you and I, can get money from abroad, in three ways. Number one, through cheques. But those could get lost on the way and once here, take three or more working days to get cleared. Two, through services like Western Union Money Transfer. But that means actually finding an outlet near you - not always easy, especially in smaller towns. And three, through a service like PayPal.

Signing up on PayPal is fairly easy. Besides all the usual details that you provide when say, opening a new e-mail account, you give them your PAN card number, your cell phone number and your credit or debit card details. PayPal checks if your bank account really exists and works. After a while, it sends you an e-mail confirming you as a brand new, PayPal account holder.

When your contact abroad needs to send you money, all you tell him is your e-mail ID. He instructs PayPal to send that e-mail ID a certain amount of money. The company digs up the PayPal account linked to that e-mail and faithfully transfers the money. Bingo, you're rich!

Now, to actually use that money, you can electronically transfer it from your PayPal account to your bank account. That transfer is free, if you're shifting more than seven thousand rupees at a time. So lots of folks let the money pile up online, before shifting it to the bank.

Or, you can use your PayPal account to buy stuff from the web. Buy books/cell phones/new dresses/plasma TVs, from sites like ebay. Some folks do that. Personally, I'd be happier if I could book movie/rail/air tickets through PayPal. But I can't. That's another story.

One tech editor I really look up to, pointed out he doesn't RECEIVE any money from anyone abroad. But he still uses PayPal for another big reason. Convenience.

With this site, 1.) he doesn't have to reveal his credit card details to random people online. And 2.) he has no problems using services like internet telephony site Skype. They're finicky sometimes about accepting payments in Indian rupees. But accept US dollars without a murmur!

Now, here's the flip side to the fairy tale. PayPal pockets 3-4% of every chunk of money transferred to your account. Plus $0.30. Very, very roughly, that's about two hundred rupees commission for every five thousand rupees of your hard-earned money (If you're transferring a hundred dollars from the US to India).

To make things worse, they might not always give you the current exchange rate. For example, they might offer you forty-five rupees to a dollar, even if your local bank teller says the rate today is forty-eight rupees. (Probably because transfer rates for the Asia-Pacific region are decided in PayPal Singapore, not India)

Also, their terms and conditions, displayed when you sign up, can be scary. In rock hard legal terms, they inform you that a.) they aren't a bank, only an agent transferring your money. B.) They won't be held responsible for any delays or glitches in transferring your money. C.) They can freeze, or simply close your account, if they feel you've been doing something illegal.

Any inconvenience you face in such events, is purely your problem. They are not bound to compensate you in any way. For example, if a hacker managed to hack your account, and use up all your money while you were sleeping, you'd have no one else to blame, but you. Touche!

I'm sorry if I scared you - this stuff came out sounding more dire than I meant it to. Like I said before, I spoke to tech-savvy people, who've been using the site for more than five years. And they're all very happy with the service. They had payment problems for a short while, when the RBI controversy first broke. But that's the only hitch they've had so far.

A random check on Google though, turned up complaint after compliant from harried Indian users. Most of them very bitter that no one bothered to warn them in advance. Some complain PayPal's charging them a stiff conversion rate even for payments returned to the sender. That's like rubbing salt into an open wound!

To be fair to PayPal, they've tried hard to be transparent about the whole thing. Farhad Irani, who heads PayPal's business in the Asia-Pacific region, offered a detailed explanation about the crisis on his blog post and even gave his personal email address to customers clamoring for clarifications.

Within hours of reaching out to them, PayPal's PR team here patched me on a telephone call to Anuj Nayar, their Global Communications Head. He patiently explained the fracas to me, bit by bit, for the better part of an hour. Quite a pleasant surprise, for a company that doesn't even have a formal office in India. (Their nearest office is in Singapore.)

But when I cross-checked my data with Alpana Killawala, at the Reserve Bank of India, I was in for a slight surprise. All money flowing across our borders is subject to two major laws. The Foreign Exchange Management Act (FEMA) and the Payments and Settlements Act of 2007.

According to those laws, organizations like PayPal should have submitted themselves to scrutiny by the RBI. They hadn't, so they were pulled up. To prevent inconvenience to customers, the Reserve Bank has allowed PayPal to honour all transactions done upto January this year. But they're still on the watch list.

If they don't satisfy all the bank's detailed questions by the thirtieth of April, their operations could be disrupted again!

Which set me scurrying to find alternatives to PayPal. And I found many - moneybookers.com, 2checkout.com, alertpay.com, payoneer.com, xoom.com. Some even claim to give better exchange rates than PayPal. But I'd never heard of any of them before, so I really don't know how trustworthy they are.

Have you been using PayPal or any of these sites to get money from abroad? What do you think about them? Are they a better option than electronic transfers from a foreign bank to an Indian bank. Or from something like a Western Union Money transfer. Do you have a better idea to transfer money? Write in, I'd appreciate it.