A recent press release issued by Banco Nacional on April 27th announced that its new partnership with American online payments giant PayPal was finalized after months of testing. The partnership will allow both Banco Nacional and PayPal to develop e-commerce payment solutions for small-to-medium business owners in Costa Rica.
The most prominent marketing point that Banco Nacional makes on its press release is related to PayPal; how the company, which has been around for almost 15 years, is the leader in the online payment industry and has more than 110 million customers in 190 countries. This makes it easier for Tico business owners to offer their products or services to many international customers. PayPal’s payment tools will now be made available to individuals and business entities who have bank accounts with Banco Nacional and access to their super-secure Internet banking platform.
A number of Ticos who have checking accounts in the United States have been able to use PayPal for purchases and e-commerce transactions in the past. In the post-9/11 Patriot Act world, it has become difficult to open bank accounts in the U.S. without being physically present. Even then a considerable amount of identification documents are required -although the same could be said for Costa Rica’s anti-money laundering measures and their effects on local banks.
Beginning in May, residents of Costa Rica with Banco Nacional accounts will be able to sign up for PayPal without having to go to a branch and stand in line.
Among the many benefits posited by Banco Nacional with regard to the partnership, the following should be given closer scrutiny:
- Making payments with PayPal conceals information from the receiver, namely account data typically used in debit and credit card transactions.
- PayPal enables e-commerce for small business owners who wish to take payments via World Wide Web gateways, email, and even mobile phones. This includes the ability to accept payments from American Express, Diners, MasterCard and Visa.
With regard to number one above, it should be noted that while PayPal users share very little information with each other, the company is known for its meticulous record keeping, data mining, and history of readily providing information to American law enforcement agencies with just a faxed request. The information released includes name, telephone number, address, email, and transaction information. In the current Trayvon Martin shooting case in Florida, for example, consider what could happen if the information of the PayPal donors to the George Zimmerman defense fund is revealed.
Should the above be a concern to Banco Nacional account holders? When dealing with any financial services provider, it is important to review all disclosures regarding record keeping and handling of information. Americans banking abroad already have to worry about FATCA and a proposed passport restriction for tax dodgers, it is thus incumbent upon them to make sure their privacy is not compromised further.
As to number two, the e-commerce benefits: business owners should carefully review the fees involved when using PayPal. They may seem reasonable to some, but costly to others. Here’s the breakdown on the fees published by both Banco Nacional and PayPal:
- Receiving funds: 4.4% + $0.30 USD to 5.4% + $0.30 USD
- Currency Exchange Transactions: If your transaction requires a currency conversion, PayPal charges a retail exchange fee based on the rates set by an external financial institution. The currency conversion amount also includes a 3.5% foreign transaction fee. The currency conversion fee varies by currency.
- Withdrawing PayPal funds from Banco Nacional (PDF): This must be done from the online banking platform using the physical token. Withdrawals are limited to $10,000 per instance and per day. They can only be withdrawn in U.S. dollars and will take 5 working days to be transferred from the PayPal virtual account to the Banco Nacional account. The bank will take a fee of $11 as commission, or 0.5 percent of the requested amount over $2,200. This means that if you want to withdraw $20, you’ll pay $11, and if you withdraw $3,000 you’ll pay $15. This does not include the fees already paid to PayPal.
As with anything, buyer beware; but, for Ticos who enjoy flexibility and the latest in technology attached to their payment systems, PayPal is making significant strides in eliminating the use of wallets and credit card terminals as we know them -as can be seen in the picture above.
For more on electronic payments in our country -without the need for Banco Nacional or PayPal, please read this previous article about mobile electronic wallets in Costa Rica.