Show me the money: PayPal to support cash payments in Russia

By Michael Carney , written on November 6, 2014

From The News Desk

Cash is king, or so the well worn saying goes. That may be changing slowly in the US, with more consumers forgoing carryng cash in favor of debit and credit cards, not to mention the emerging category of mobile wallets. But elsewhere in the world, particularly in emerging markets, it remains as true as ever.

Not surprisingly, the lack of bank account and credit card penetration in many markets can be a major barrier to ecommerce adoption. PayPal is looking to solve this very problem in Russia, with the launch of a new cash payment option in partnership with Russian payments platform Rapida. (See Update below.)

According to a report in the Moscow Times, under the newly announced system consumers will be able to visit one of 8,000 locations of electronics retailers Yevroset and Svyaznoy to submit cash payment for purchase completed online.

The idea behind Paypal’s new cash payment offering seems heavily borrowed from PayNearMe, a Sunnyvale-based company which has spent the last four years building up a similar network of 17,000 US retail locations (mostly Family Dollar and 7-Eleven stores) to accept cash for things like rent, municipal government payments, lending, and transportation payments.

Russia has its own “Cash-based electronic payments” market, which the Moscow Times notes accounted for $18.6 billion (850 billion rubles) in payments volume in 2013 according to a J'son & Partners Consulting report. But this network of non-banking payment terminals can be difficult to tap into for international merchants, such as those selling on eBay or the millions of other websites that PayPal powers. Under the newly proposed retailer-based system, these merchants will more easily be able to serve cash-based Russian consumers.

The timing of PayPal’s move into the cash market can likely be traced back to recent shifts in Russian laws relating to anonymous payments, the limits on which were recently raised to $330 (15,000 rubles) per transaction, or up $870 (to 40,000 rubles) per month.

It’s unclear at this time whether PayPal will be sharing revenue with its Russian retailer partners, or whether it is simply promising to drive foot traffic into their stores – an approach that has worked for PayNearMe in the US. Also, there’s no word yet as to whether there will be additional fees associated with cash payments for either merchants or consumers. Finally, the company has yet to explain how it will handle refunds for cash transactions. Pando reached out to PayPal for comment on these issues and the program in general, but has yet to receive any response at the time of publishing.

Update: An Uber spokesperson later clarified that this offering is only available as a means consumers of adding cash to their PayPal account, which can then be used to make purchases. They explain:

This is cash top up only. People go into one of 8000 mobile phone stores in Russia, give their PayPal email address and the cash to have it paid onto their PayPal account. It's a great service for people without credit cards to use PayPal to shop online, but it's not the same as making a purchase online and then going into the store to complete the payment.
PayPal’s Russian electronic-cash service is not yet live and the company has given no word on when it will begin processing cash payments. When it does, Russia will be the first market in the world where consumers can open a PayPal account without linking a bank account or credit card. It seems likely, however, that PayPal would look to duplicate this offering in other cash-centric markets around the world, assuming the rollout in Russia goes according to plan.

Apple, Google, and dozens of bitcoin startups may have launch a collective assault on physical wallets and the cash and payment cards that they traditionally contain. But that doesn’t mean the majority of the world’s population will abandon these financial staples any time soon. Judging by PayPal’s latest offering, the online payments pioneer is making a big bet that cash is here to stay, at least for the near- to mid-term. The only thing changing, is that being a cash buyer will no longer mean you can’t also buy online.

[illustration by Brad Jonas for Pando]