Pay­pal doesn’t work in Ukraine, but re­source­ful lo­cals know how to use it

Kyiv Post Legal Quarterly - - Contents - By Denys Kras­nikov kras­[email protected]­

Ukrainian en­tre­pre­neur Petro Golota sells hand­made woolen shoes on­line, on such U.S. mar­ket­places as Etsy and ebay. Both web­sites sup­port only one pay­ment sys­tem — Pay­pal.

It is a con­ve­nient in­ter­net-based money trans­fer ser­vice pop­u­lar in the West. But Pay­pal doesn’t work in Ukraine. While Ukraini­ans can use the ser­vice to send funds to other Pay­pal users, they can’t re­ceive money.

So Golota and thou­sands of other lo­cal small en­trepreneurs have to be cre­ative to find a way to earn their liv­ing by sell­ing their hand­i­craft via vir­tual mar­ket­places like Ama­zon, ebay, Etsy, Craftsy, Ravelry, and many oth­ers, where Pay­pal may be the only pay­ment op­tion. Shady in­ter­me­di­aries For more than two years, crafts­man Golota’s busi­ness has re­lied on a shady but con­ve­nient go-be­tween.

The in­ter­me­di­ary, called Western Bid, has its own Pay­pal ac­count in the United States; it re­ceives money that Golota earns on ebay and Etsy, charges a 5 per­cent com­mis­sion, and sends the rest of the money to Golota's Ukrainian bank.

"It's easy to work with them," Golota told the Kyiv Post. "Al­most legally.”

Western Bid adamantly re­fused to talk with the Kyiv Post. Its CEO Michael Bir­man said doesn't want pub­lic at­ten­tion from English­s­peak­ing com­mu­ni­ties.

An­other go-be­tween pop­u­lar with Ukrainian free­lancers, Seller-on­line, was also shy about its op­er­a­tions and ser­vices. "We would (talk to you) if you were our client," the op­er­a­tor said, sev­eral times re­fus­ing to give his name.

Law firm epravo co-founder Vi­talii Vla­siuk said such a re­ac­tion could mean that both en­ter­prises are work­ing in the "gray zone" abroad — their op­er­a­tions are not reg­u­lated by cur­rent laws, but they’re try­ing to keep a low pro­file.

Both Etsy and ebay re­fused to talk with the Kyiv Post about these firms as well.

Even though Ukraine’s free­lancer com­mu­nity ad­mits such in­ter­me­di­aries are in­deed dodgy, many small en­trepreneurs, in­clud­ing Golota, are happy they ex­ist — there’s sim­ply no other easy op­tion for them.

For­eign banks

There are other ways to get around the lack of full Pay­pal ser­vice in Ukraine.

Pay­pal is widely used not be­cause its ser­vice is unique, but sim­ply be­cause this com­pany has come to dom­i­nate the global mar­ket for elec­tronic pay­ments.

And so Ukrainian Ju­lia Kyry­luck — even though she sells trans­la­tion ser­vices, man­ages so­cial me­dia and does not work with mar­ket­places at all — has to use Pay­pal some­times. Her cus­tomers "do not al­ways want, or can­not" use al­ter­na­tives to the ser­vice, she said.

"And no ar­gu­ment can con­vince them," she told the Kyiv Post. "They say, 'I got used to it and that's all.'"

The prob­lem made Kyry­luck go a long way to find a so­lu­tion — lit­er­ally: When she went to Thai­land on a travel visa, she ap­proached 10 lo­cal banks to open an ac­count there. Many re­fused be­cause she was not vis­it­ing the

coun­try for busi­ness rea­sons, but one agreed.

Now, back in Ukraine, she works re­motely, re­ceives pay­ments to her Thai Pay­pal ac­count, trans­fers the money to the Thai bank linked to it (this takes two weeks), and then — sends the money to Ukraine through ser­vices like Money­gram or Western Union.

These money trans­fer ser­vices car­ried out trans­ac­tions worth over $9 bil­lion in 2017, ac­cord­ing to the Na­tional Bank of Ukraine, the coun­try’s cen­tral bank.

A lot of Ukrainian free­lancers ex­ploit schemes sim­i­lar to Kyry­luck's. Some have stud­ied or worked abroad and kept their for­eign bank ac­count; when Pay­pal asks such users to pro­vide proof that the per­son still lives abroad, some give up their ac­count, while oth­ers re­sort to pho­to­shop­ping util­ity bills with a for­eign ad­dress.

Oth­ers have friends abroad who are will­ing to let them use their Pay­pal ac­counts.

Kyry­luck's Thai bank card ex­pires in 2020. She will have to go back to Tai­wan and ask it to reis­sue the card. Oth­er­wise, she said she might go to Columbia or Panama, where she heard banks re­quire even fewer doc­u­ments to open an ac­count.

Tallinn op­tion

Af­ter Es­to­nia, a Baltic coun­try of 1.3 mil­lion peo­ple, in­tro­duced e-res­i­dency in 2014 — which al­lows non-es­to­ni­ans to get ac­cess to Es­to­nian ser­vices such as com­pany for­ma­tion, bank­ing, and pay­ment pro­cess­ing — Ukraini­ans gained an­other way to get hold of a full-fledged Pay­pal ac­count.

How­ever, this way is not hugely pop­u­lar, as en­trepreneurs in Es­to­nia have to pay 20 per­cent in taxes, whereas the tax in Ukraine is just 5 per­cent. Only 2,500 Ukraini­ans have Es­to­nian e-res­i­dency.

On­line in­voic­ing

For De­nis Belo­zorov, a free­lance com­puter sys­tem re­pair­man, it’s a lot­tery re­ceiv­ing money from abroad — some­times it’s easy, some­times not.

Most of the time af­ter fix­ing some­one's prob­lems with com­puter soft­ware in the United States, Canada, the Euro­pean Union, or any­where else, Belo­zorov sends an in­voice.

He uses the Port­mone or ipay ser­vices, which cre­ate a web page that looks like a typ­i­cal in­ter­net ac­quir­ing page — with a sum and boxes for bank card de­tails; the sort of page one would see pur­chas­ing some­thing in an on­line store. The ser­vices charge 2.5 per­cent of the sum trans­ferred.

Ukraini­ans who try to sell their ser­vices and goods to in­ter­na­tional clients are of­ten lim­ited to the ser­vices of Pay­pal for money trans­fers. This is a prob­lem as Ukraini­ans can only use the ser­vice to send funds to other Pay­pal users but can’t re­ceive money. The re­stric­tions lead many Ukraini­ans to use third par­ties that have for­eign Pay­pal ac­counts.

This is con­ve­nient for Belo­zorov in gen­eral, but from time to time cus­tomers don't want to use the un­known ser­vice, or worse — for­eign banks can block the trans­fer, hav­ing de­ter­mined the pay­ment to Ukraine to be sus­pi­cious. In the lat­ter case, cus­tomers have to call the bank and con­firm the pay­ment over the phone.

Belo­zorov says that oc­ca­sion­ally a cus­tomer's bank card is old and doesn’t sup­port 3-D Se­cure, a sys­tem that asks the user to type in a pass­word linked to the bank card. If so, noth­ing can be done, be­cause Ukrainian banks only ac­cept trans­ac­tions ver­i­fied by pass­word.

Given all these in­con­ve­niences, cus­tomers might de­cide to use the ser­vices of Belo­zorov's com­peti­tors.

"My in­di­vid­ual pay­ments are small, so I need as many clients as pos­si­ble," he told the Kyiv Post. "I would hap­pily work via Pay­pal and trans­fer the money to my en­tre­pre­neur bank ac­count… as peo­ple do in civ­i­lized coun­tries."

Pay­pal and Ukraine

Pay­pal can be used in more than 200 coun­tries, while the send-only strat­egy is used in al­most half of them, in­clud­ing Ukraine.

Galina Skatk­ina, the head of com­mu­ni­ca­tions for Pay­pal Rus­sia and Cen­tral and East­ern Europe, told the Kyiv Post that “Ukraine is an im­por­tant mar­ket for Pay­pal” and that the com­pany aims to help lo­cal con­sumers fully ben­e­fit from what global e-com­merce has to of­fer.”

How­ever, Skatk­ina sees no prospect of Pay­pal rolling out any new func­tion­al­ity in Ukraine any time soon.

“Cur­rently we have no news to an­nounce re­gard­ing turn­ing on Re­ceive func­tion­al­ity in Ukraine,” she said. “But send-only func­tion­al­ity doesn’t mean that we take our obli­ga­tions to our cus­tomers in Ukraine lightly, nor does it mean this mar­ket is ex­cluded from our most im­por­tant global, con­sumer up­dates.”

In an­other more for­mal re­ply from Pay­pal cus­tomer sup­port, the com­pany says that when of­fer­ing its ser­vice in a coun­try, the com­pany “needs to en­sure that it is com­pli­ant with both lo­cal and in­ter­na­tional laws” be­fore launch­ing its full ser­vice.

The Na­tional Bank of Ukraine, in turn, claims that it has “taken a range of steps to en­sure Ukraini­ans can have ac­cess to in­ter­na­tional pay­ment sys­tems” and that com­pa­nies like Pay­pal can work in Ukraine with no le­gal con­straints.

“The NBU has a pos­i­tive po­si­tion to­wards all in­ter­net pay­ment sys­tems that pro­vide ser­vices in Ukraine or seek to en­ter our mar­ket, pro­vided that they com­ply with the Ukrainian leg­is­la­tion,” an NBU spokesper­son told the Kyiv Post.

Mean­while, Golota the shoe­maker has to work with shady com­pa­nies; trans­la­tor Kyrylchuk looks for coun­tries that have lax laws al­low­ing banks to open a bank ac­count for those in the coun­try on a travel visa; and com­puter re­pair­man Belo­zorov just has to hope that the next trans­ac­tion from a cus­tomer will go smoothly.

Pay­pal al­lows Ukraini­ans to send money to other users, but not re­ceive money, forc­ing peo­ple to search for other op­tions in trans­fer­ring pay­ments.

The con­ve­nient in­ter­net-based money trans­fer ser­vice Pay­pal is pop­u­lar in the West, yet the ser­vice doesn't fully op­er­ate in Ukraine. Ukraini­ans can use the ser­vice to send funds to other Pay­pal users but they can't re­ceive money — a ma­jor ob­sta­cle for those trad­ing on on­line mar­ket plat­forms such as ebay, Etsy, where Pay­pal might be the only pay­ment op­tion. (Kostyan­tyn Ch­er­nichkin)

Hey! Do you need any money trans­fers?

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