PayPal now just a few clicks away from being your friend

Paypal has revolutionised electronic commerce across the globe. In most countries you can open a PayPal account with a couple of clicks on its website

You can then easily and securely receive payments and make payments in any currency. You can convert your balance into any currency or hold multiple currency balances. Because of that, PayPal has become an essential enabler of international commerce.

But this utopia has only existed for businesses and individuals around the world that are not shackled by exchange controls.

In South Africa it has been technically illegal to use PayPal. It has still been possible - if you had an offshore bank account you could open a PayPal account (and lie about living overseas on the application form).

I know of one person who opened a PayPal account more than a decade ago to operate his international dealing business from his bedroom in a South African university town. But this was illegal and he had to emigrate as his business grew.

Given the vast opportunity for international transactions that PayPal represents, it has been a missed opportunity, one of many that South Africans have missed because of exchange controls.

FNB has now done something about this. The bank approached PayPal two years ago to figure out a way to bring its services to South Africans. That has required extensive, and tricky, negotiations with the Reserve Bank. PayPal is also feeling a little gun-shy after getting into trouble with Indian authorities last month, who forced it to cease offering services to small businesses there.

In some regions, PayPal is registered as a bank, but in others it operates in a regulatory grey area, usually treated as a payment facilitator not a deposit taker.

The deal with FNB ensures it is compliant with exchange control rules. FNB will act as an authorised dealer.

FNB clients will be able to move cash from their accounts into a PayPal account and back again. Each time, FNB will charge 1.5% and make a small margin from the exchange into and from US dollars. It will report transactions to the Reserve Bank, as it currently does with credit cards and other foreign exchange activity.

South Africans will still be subject to the current control rules, although it will be interesting to see how these are applied. Individuals are meant to repatriate any foreign payment within 30 days - so if your get a payment into your PayPal account you have to have the cash in you FNB account within a month.

That is, apparently, going to be your responsibility. If you are a company, though, a change in rules announced in the last budget speech allows you to leave cash received offshore forever.

For companies, PayPal provides a very low-cost way to hold offshore balances and manage currency risk by switching between currencies.

In global ecommerce, buying things with a credit card has been relatively straightforward, although more expensive than via PayPal.

But. if you wanted to receive payment internationally, unless you had a foreign bank account you'd have to run the fees gauntlet of Swift (an international payments mechanism) to get it - a hugely bureaucratic, expensive and slow process. Now it could not be easier. International clients can transfer to your PayPal account with the click of the button.

Plus, once you have a PayPal account, you can take credit card payments too. Of course, payment is where PayPal makes its money, and will charge 2.9% to 3.9% for the payment sent to you (payments by you are free). That is far less than you would pay with any foreign payment receipt mechanism.

Access to simple international financial services for ordinary South Africans remains appalling.

Ironically, PayPal was co-founded by a Pretoria Boys' High old boy, Elon Musk, who had settled in the US. Had he stayed in South Africa, it would never have happened. If only the next Elon Musk could emerge without having to leave the country. The FNB/PayPal deal is a big step in the right direction.

None of this is going to overcome the other major problem for international commerce, namely logistics. South Africans live very far from the markets of Europe, the US and the East - and the Post Office is not the most effective transfer agent you could hope to find.

But South Africa does have a very good courier industry, which, while expensive, will get your products out to clients across the globe as quickly as possible. Now you will also be able to get payment efficiently.

With the World Cup imminent, there is an ideal opportunity to market oneself to a potential audience in the flesh. The flood of cheap bandwidth services currently entering the South African market will help things. For on-the-ball entrepreneurs, now is an ideal time to establish an international sales business.

Feedback: banknotes@intellidex.co.za