We all know about policy updates. Sometimes it is quite transparent, while other times it can be masked as a ‘soft update’. In our opinion, we feel policy updates are usually not in favour of the users, which is kinda logical. Since all companies are supposed to be profit-making in nature. Today (as of 31st October 2020), a policy update by PayPal has been made effective, which is likely to render Singaporean users with a US bank account, i.e. users with a TransferWise USD bank account, less inclined to continue using their services. Here’s why.
Free Transfer Up to 900 SGD.
Known for cheap remittance services. And so much more now. Transferwise is the new Western Union.
Amendments to USD withdrawal fees which sets users outside of the USA back with an expensive 3% fee.
Yep, you heard us right.
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Suppose you were using a TransferWise bank account or any regular USD bank account to withdraw USD from your PayPal balance previously. In that case, this is effectively a hard counter to the conversion rate bypass.
What do we mean by conversion rate bypass?
In the past, PayPal users outside of USA can freely withdraw USD to their USD bank account at no charge at all, i.e. free.
Users can then use a cheaper 3rd party remittance service, such as TransferWise, to convert the foreign currency to their currency of choice at mid-market rates instead of directly converting using PayPal and withdrawing the balance to their local bank account.
This bypass will save a ton of conversion fees since PayPal typically charges a spread on top of the mid-market rates.
We even wrote an entire step-by-step guide here on how you can do this bypass awhile back.
With this change in place, it is actually better to skip the mumbo-jumbo and hand PayPal the moolah.
That is if you are still going to use PayPal as your e-wallet in future.
Does this policy update only affect users in Singapore?
Users based in New Zealand and Kenya are also subject to a 3.00% fee while balance withdrawal to a US bank account by users in Chile and the Dominican Republic will be subject to a 0.50% fee.
You can also read all the latest policy updates on PayPal here.
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You or your company may still require to transact USD regularly, and this change could bring a severe impact to the bottom line.
Although the easy way out is to switch PayPal out for an alternative payment gateway like Square and Stripe, or even request clients to do a direct bank transfer to your USD bank account, most clients are accustomed to using PayPal.
It is also good to note that the friends and family option that isn’t available in Singapore due to regulatory reasons (which removes the transaction fee) is still a feature in many other countries.
What are your thoughts? Is using PayPal to receive USD a viable option in Singapore?
Will this policy update bring about a massive change to your shopping/investment habits? Let us know!