Online payment system company PayPal is going to shut down its domestic payment business in India come this April. This decision comes when the company is just shy of completing its fourth year of kickstarting its domestic payment processing operations in India, which remains the world’s largest internet market.  

The company gave a long statement where it said that it would now invest its resources in “enabling more international sales for Indian businesses”. The company statement read, “From 1 April 2021, we will focus all our attention on enabling more international sales for Indian businesses, and shift focus away from our domestic products in India. This means we will no longer offer domestic payment services within India from 1 April.”  

This move comes after the company’s steady decline in garnering profits over the years. It should be noted that the hums of the news were first heard by The Morning Context. The website broke the news in December that PayPal was on its way to abandoning the domestic payment processing arm of its business to focus on cross-border payments.  

The domestic operation of the American payments processing giant right now includes payment gateway and services for online merchants. However, the company was reported to have incurred losses for its Indian payments business in the Financial Year 2019. According to the company spokesperson, the losses came due to high merchant acquisition costs, infrastructure expansion, and talent onboarding.  

In 2019, PayPal India showed a 3.5x surge in its losses despite a 2.5x growth in its revenue. The revenues came at the cost of expenses which grew by 1.53x.  

For FY19, PayPal generated a revenue of Rs. 657.4 Cr against the Rs. 261.03 Cr of revenue for FY18. The expenses however painted a different picture with Rs. 660.2 Cr of expenses accounted for in FY19 against that of Rs. 260.8 Cr for FY19. The losses came to Rs. 8.13 Cr in FY 19 against that of Rs. 2.27 Cr for FY18. 

According to Inc42, PayPal will be initiating a restructuring exercise and from 6 February will notify Indian merchants about its plan of termination of contracts by April 1, 2021. According to reports, just last year PayPal ended its contracts with its third-party staff citing the closure of other domestic projects. As of now, the company will be instructing its Bengaluru, Chennai and Hyderabad tech centers to focus on global transactions and remittances.   

A spokesperson spoke to online technology newspaper TechCrunch and said, “With the shift in priorities, some PayPal employees have been reassigned to new teams. Our focus is to always minimize the impact on our people whenever possible. Overall, our workforce is growing in India, not reducing. We are currently recruiting across our sites in India in large numbers.” 

PayPal cites that in the last year, the company has processed approximately $1.4 billion worth of International sales for Indian merchants. According to the company spokesperson, PayPal will continue investing in “product development that enables Indian businesses to reach nearly 350 million PayPal consumers worldwide, increase their sales internationally, and help the Indian economy return to growth.” 

The company spokesperson also added that “India is a very crucial market for PayPal, and after a thorough analysis, we decided that we are best placed here to focus on enabling cross-border trades and exports for Indian businesses aiming to go global.”

According to reports, the company is now eyeing to scale up its cross-border trade infrastructure for SMEs to eat a large portion of the untouched share of the cross-border remittance market. It seems like an appropriate measure taken by the company since the Reserve Bank of India also identified it as the second cohort of its regulatory sandbox program to make international remittance accessible and more affordable. 

Under the RBI’s Regulatory Sandbox program, banks, fintech and startups can work with the RBI in real-time by conducting real-time experimental pilots under a central bank to assess the efficacy of mass-market applications.  

History of PayPal in India 

For the longest time, PayPal was considered the OG (original) of digital payment companies. Since the beginning of the millennium, PayPal was facilitating online transactions for small and large merchants alike. 

The company launched its Indian arm in 2007 but was took almost a decade to establish a decent footing. In 2017, after the Modi government announced an 85% demonetization of the nation’s currency circulation, the company began the domestic payment processing. However, several payment platforms such as BillDesk, RazorPay, had cluttered the online payment space. Paytm remained to be the biggest disrupter as it also introduced a digital wallet along with seamless third-party integration on its UPI network.