Issue 3, 2013. June-July

   

PAYPAL IN GEORGIA: PROMOTION FOR E-COMMERCE

PayPal officially launched its operations in Georgia on April 11, and local businesses are betting its online service can bolster e-commerce in the country.

Maia Edilashvili

E-commerce has yet to boom in Georgia, but a new deal with PayPal has local online retailers and banks feeling bullish about its future growth.

A recent survey conducted among 426 adults in Tbilisi by ACT Research, a consulting group, showed that only 17 percent of the interviewees had made an online purchase during the last six months.

Of these online shoppers only 16 percent buy products - mostly clothes, home appliances, electronics, shoes and accessories - at Georgian stores, while the rest prefer to make purchases abroad and wait for delivery.

Kakha Barabadze, Head of the Public Relations and International Cooperation Division at National Bank of Georgia, believes that the launch of the PayPal service in Georgia is "a significant step forward" in terms of developing e-commerce. "The volume of online payments at commercial banks will increase," he told Investor.ge.

PayPal provides online shoppers and entrepreneurs a simpler way to send money without sharing financial information, and the flexibility of being able to pay using their account balances, bank accounts, credit cards, or promotional financing.

With 128 million active accounts in 193 markets and 25 currencies around the world, PayPal enables global commerce, processing more than 7.6 million payments every day. Now Georgians with Visa, MasterCard and American Express cards can register at PayPal and enjoy shopping at international online auctions and stores.

The Georgian government has long lobbied for PayPal to operate in Georgia. Throughout the past several years, National Bank of Georgia (NBG) and the Ministry of Economy have been in intensive cooperation with PayPal, including "numerous formal and informal communication, correspondence, phone conversations and visits," Barabadze noted.

Given the California-based company's strict criteria for new markets, Georgia sees PayPal's decision as recognition of its reliability and potential. Georgians, however, still don't have access to the entire spectrum of PayPal services, such as the option of posting local producers on eBay.

While Georgia did request the full package of PayPal services, currently Georgian users are only allowed to make online payments. The right to receive/withdraw funds and set up a merchant account is not yet available for Georgia.

Sophie Balavadze, Head of Public Relations at Bank of Georgia, the country's leading commercial bank, believes that even access to PayPal's basic services will bolster the country's e-commerce industry.

"PayPal will allow payment on such websites which were beyond reach before. Their entry is an acknowledgment that Georgia is a developing market for e-commerce," she said, noting that, as of December 31, 2012, the number of online transactions via Bank of Georgia increased 36% compared with the previous year, and the volume of transactions grew by 66%.

Damien Perillat, the managing director at PayPal Central Eastern Europe, told us that while the company cannot comment on local numbers, which also include the number of users per market, he can say that they are "really satisfied" with the results.

"It seems that Georgian consumers were looking for a simple and secure way to buy goods without sharing financial info," he noted in an email interview. "More than 5 million active accounts were added in the first quarter of 2013 globally- Georgia made a serious commitment to this growth."