Online payment service provider PayPal has launched its Middle East operations to target the fast-growing retail e-commerce sector in the region. In addition to its current markets in the UAE, Qatar and Kuwait, PayPal had enabled four new markets – Saudi Arabia, Jordan, Bahrain and Oman – to send and receive payments.
As part of the launch of its operations, PayPal announced its partnership with logistics provider Aramex to make overseas transactions easier for Middle East consumers. PayPal will use the Aramex Shop & Ship service to support consumers in the Middle East and North Africa by shipping goods from online retailers in the US, UK and China. The company also announced new customer service opening times for consumers in the region, with business hours set according to UAE time, as opposed to US time.
“We aim to solve the problems faced by consumers in the region when they shop online, such as information security, availability of merchants, and international shipping. PayPal offers a safe and secure way to shop online and this deal with Aramex now makes the transactions consumers make in their home countries simpler and more straightforward,” says Elias Ghanem, managing director of PayPal Middle East and North Africa.
“Mobile and online commerce is still in its infancy in the Middle East. However, mobile technology is hugely popular and people are gaining confidence in online retailing here, through exposure to daily deals websites, airline portals, banking, etc. According to IMRG International, online B2C e-commerce sales in the region, in contrast, will reach an estimated $15 billion by 2015. Therefore, the offline to online opportunity is significant,” adds Ghanem.
According to him, PayPal’s unique selling proposition is the security and confidence online shoppers associate with the brand. “We have more than 100 million active users around the world, and they are more likely to shop at an online store if they see a PayPal logo because then they do not have to enter their credit card details. When an online shopper opens a PayPal account and links credit card information to the account, PayPal converts the credit card information into an email address and password. Shoppers do not need to enter credit card information at the time of purchase at any online store that works with PayPal. Instead, they just provides the email and password,” says Ghanem.
PayPal also offers buyer protection. If goods are not delivered and a customer informs PayPal, the company asks the merchants for proof of delivery of the items. If the merchant does not provide the proof of delivery, PayPal reimburses the customer on behalf of the merchant. “We ensure that we are prepared for such situations by holding a reserve of our merchants’ funds. If shoppers do not have to enter credit card information, it builds confidence over time and attracts new buyers, which increase sales volumes for retailers,’’ says Ghanem.
At present, PayPal represents about 5% of the Middle East’s e-commerce sector. The company has set a target to double its market share over the next three years, and increase its number of merchant accounts in the MENA from a few hundred to 25,000 by 2015.
“We are working to increase our partnerships with merchants to offer one-stop solutions to help them take their businesses online. Retailers do not have to limit themselves to selling only to shoppers with credit cards. If shoppers do not wish to use cards, they can link their bank accounts to their PayPal accounts. Therefore, instead of cash on delivery, online retailers can accept payments from the shoppers’ bank accounts,’’ says Ghanem.
However, one of the concerns for online retailers in the UAE, particularly those selling consumer electronics at low profit margins, has been the transaction fees charged by PayPal. This is because online retailers do not yet have the sales volumes to justify the cost per transaction.
Ghanem has a word of advice for such retailers. “My recommendation to merchants is not to worry about the transaction cost even though it could be significant for them, but to see it as an engine for incremental sales. We only charge merchants when they sell. A retailer who opens a merchant account with a bank will have to bear the set up and maintenance costs of the account, in addition to transaction fees. The transaction costs involved when dealing with a bank could look smaller as compared to those of PayPal. However, PayPal doesn’t does not charge merchants any additional fees other than the transaction fees,” he explains.
“Furthermore, it’s not easy for startup companies and small businesses to open merchant accounts with banks not only because of the costs but also the documentation required and lengthy processes involved. At PayPal, any retailer can open an account,” adds Ghanem.