Failing PayPal, Freelancers Turn to Popular Payment Service Payoneer KyivPost

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Online payment systems like PayPal have been a game-changer for freelancers. They opened up a new world of global business opportunities, making it easier to work with foreign clients from any part of the world, including Ukraine.

However, the world’s most popular service, PayPal, only partially works in Ukraine: it allows you to send money abroad – not to receive it. And as the niche was opened, many similar services appeared such as Wise, MoneyGram, and Payoneer.

Payoneer is the most popular among Ukrainian freelancers – around 30% of them use the US service, according to experts. They are mostly tech specialists, who usually work with overseas clients and need to get quick and cheap transfers.

Payoneer processed more than $ 44 billion in payments last year. In 2021, it plans to generate $ 430 million in revenue from its service. The company is profitable, but it does not disclose its results.

Igor Kovaliov, Managing Director of Payoneer in Ukraine and Belarus, believes Ukrainian tech freelancers are taking over the world and Payoneer is here to “empower” them to do so.

“We are helping Ukrainian entrepreneurs to create more jobs and contribute to the growth of the digital economy,” Kovaliov told the Kyiv Post.

In the absence of PayPal

When GlobalMoney launched Ukraine’s very first online service for transferring money without having to open a bank account in 2013, freelancers were among the first to use the service, according to the company’s chief commercial officer, Alexandr. Turkevich.

Since then, the online payments market in Ukraine has “actively developed,” Turkevich said. The prospects for future growth are even brighter. But while there are a variety of services to transfer money domestically, including GlobalMoney, international payment services “are not very developed,” he added.

Many anticipated the arrival of PayPal, but the company never rolled out its service in Ukraine.

Ilia Kenigstein, founder of the Creative States coworking chain and initiator of the movement to bring PayPal to Ukraine, said restrictions and National Bank oligarchs were blocking PayPal’s arrival.

“The Iron Curtain that we put up for ourselves,” Kenigstein describes.

Ukraine is not a priority for PayPal, but Xoom, a PayPal affiliate that allows users to send money directly to banks and overseas cash pick-up points, has entered the Ukrainian market in 2018.

Service from the San Francisco-based company here is limited. According to Kenigstein, Xoom users can only withdraw payments from the United States at cash pick-up points, including banks like Oschadbank, PrivatBank, and UkrGasBank.

Ukraine is by far not the only country where full PayPal service does not exist. Other post-Soviet countries such as Azerbaijan, Armenia and Belarus follow the same pattern. PayPal also bailed out Russia last year and only offers cross-border payments there.

The rise of a new era

Fortunately for local freelancers who sell their services overseas, there are other options. As the demand arose, online services arose to meet the needs. One of them was the American financial services company Payoneer.

Payoneer provides a virtual bank account to accept and send money around the world. He’s partnered with thousands of digital marketplaces, including Upwork, a website that connects clients and freelancers.

Once freelancers complete a job through the Upwork website, they receive payment into their Upwork accounts. Then they transfer it to their Payoneer account.

While the commission for withdrawing money from different online platforms or networks may vary, the process of transferring from Upwork to Payoneer costs $ 1 regardless of the amount, typically taking two days. But there is also an instant option available for $ 2.5.

Once the money is in the Payoneer account, users can send the money to their local bank accounts for a 2% commission.
Payoneer offers several ways to get paid online, but it is only intended to be used to send or receive business payments.

Competitors amounts

Wise, formerly TransferWise, also offers a business account for transferring money abroad.

Savvy users can make international payments without the money ever leaving the country of the currency.

First, they transfer the amount from their local bank account to the Wise account. Once the money is deposited, Wise will exchange the currency at the mid-market rate and provide the equivalent amount from their account where the recipient is located to complete the payment transfer.

The London-based fintech company has accounts in multiple countries and in more than 50 currencies to avoid high bank exchange fees for its clients.

If the transfer amount does not exceed $ 140,000 to a recipient in Ukraine, the commission takes a small, flat fee of $ 0.25 and 2.23% of the transfer. The conversion calculator available on the site will count the exact cost of transferring money in the designated currency.

Moneygram is also a popular choice when making international payments. The US money transfer company bases the fees on the amount of the transfer and the payment method used.

There are two ways to send money to Ukraine: withdraw cash at any MoneyGram agent or direct payment to the recipient’s bank account.

If a sender were to transfer $ 1,000 to a recipient in Ukraine, the charge is $ 14.99 (about 1.5%) for cash withdrawal and $ 12.99 (about 1.3%) on a Bank account.

Western Union, one of the largest and oldest money transfer providers in the world, has over 9,000 branches in Ukraine, where it works with Ukrainian banks like PrivatBank and Raiffeisen Bank Aval. Unlike Payoneer, Western Union does not allow freelancers to open local receiving accounts in their employer’s currency. (Kostyantyn Chernichkin)

Global Virtual Accounts

While there are plenty of other options, freelancers have said that they enjoy using Payoneer because it is convenient to have all payments in one place.

Payoneer account holders can also sign up for the global payment service which allows them to have local receiving account details in different currencies, which they can share with customers when requesting payment.

Receiving accounts in some currencies work as if users have real local bank accounts, allowing them to get payments from customers and markets through local bank transfers. Money transferred in this way goes directly into the basic Payoneer account.

Oleksandr Slobodskyi, a freelance design writer who has used Payoneer for seven years, said some sites like Amazon require a US bank account to receive money and many customers prefer simple wire transfers.

Slobodskyi said the global payment service can be “very convenient” when working with multiple international clients.

“To customers, it looks like a quick and cheap local bank transfer,” Slobodskyi, who blogs about payment systems, told the Kyiv Post.

The American financial services company also offers the possibility of ordering a physical bank card from any part of the world. It is linked to the Payoneer account, which can be used at ATMs, in stores or online – anywhere MasterCard is accepted.

Prepaid cards are issued for free as long as the user has earned the first $ 100 on the Payoneer account. It takes about 2-3 weeks to get to Ukraine, and the annual card maintenance fee is $ 29.95. There is also a 3.5% fee for any transaction made in Ukraine.

Independent financial expert Oleg Bilous said that the debit card is not very useful in Ukraine due to the high currency conversion rate, but having a Payoneer account always helps save money by avoiding taxes.

Like most freelancers, Bilous is registered as a private entrepreneur. His classification requires a tax rate of only 5% (if he earns less than $ 253,000 per year). To remain eligible for the reduced tax rate,

Bilous makes sure not to exceed the limit by leaving the excess amount in his Payoneer account.

Many freelancers, he said, take advantage of Payoneer, avoiding taxes altogether by transferring small amounts that go unnoticed.

The growth of self-employment in Ukraine, however, is noticeable. Ukraine ranked fifth in the world for growth in freelance income. It is an attractive destination because of a large number of specialists at a relatively low cost, according to Konstantin Rudenko, product manager at Freelancehunt.

In processing the payments that freelancers receive from abroad, Payoneer’s Kovaliov noticed a trend – Ukrainian freelancers are “conquering international markets” and it is “impressive”.

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