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Empowering Freelancers in India: Why We Developed the Indian Local Bank Transfer Withdrawal Feature

Payza India Freelance

Ever more Indians are choosing the entrepreneurial path for career development, so much so that a record number now provide freelance services to international clients. While the freelance industry has experienced rapid growth in recent years, the development of an e-commerce infrastructure and efficient banking services for these professionals has lagged behind.

We would like to explain these challenges and why we developed international online payment solutions tailored for freelancers in India to aid the growth of this economic sector with a focus on our latest feature of the Indian Local Bank Transfer Withdrawal.

Mutual benefits: Indians say Namaste to digital freelance work

The expansion of internet connectivity in developing countries has enabled previously isolated professionals to connect with an expansive client base throughout the world. This is particularly true for India, where over 15 million freelancers now provide online services as independent contractors in services ranging from tutoring, web development and design of computer algorithms.

Payza Indian eCommerce

Access to these professionals provides several benefits around the world; their provision of in-demand skills and services at affordable prices enable many small businesses with limited resources to access flexible, on-demand employees, thus providing small enterprises with a competitive advantage.

Indian freelancers accrue significant benefits as well. They obtain new opportunities in the form of:

  • More income from a diversity of clients and business sectors;
  • Greater financial independence;
  • Diversified opportunities to pursue more satisfying, creative and entrepreneurial work.

The flexibility in location and work hours provided by freelancing provides employment options for population segments previously excluded from the labor market, such as full-time students, women at home caring for children and people with disabilities. Bolstering the Indian freelance industry is thus about more than economic development, but also advancing equality of opportunity among population segments that need it most.

While the benefits are clear for both freelancers and clients that hire their services, few are aware of common challenges Indian freelance professionals face in reaching their maximum potential. A continuing challenge is the simple act of getting paid.

Economic development in the digital world presents challenges

Once internet penetration hit a critical mass, India should have been able to jump into the emerging digital economy with both feet, but that wasn’t the case. The primary problem was a simple means to get paid. Without payment gateways to serve their needs, Indians were often on the outside looking in when it came to e-commerce.

Basic online shopping was a hassle, but not as great as the hassle of getting paid for online work solicited from international clients. Many payments to Indian freelancers would go through costly and unreliable channels.

Payza India traffic

It could take over a month from the time when the freelancer completed their work and receiving a foreign check for their services. Add to that the time required to deposit and exchange the funds to the local currency so that they could finally spend their hard earned salary. Now imagine the stress and worry of a freelancer serving a client for the first time; they had few means to assess whether they could trust the client to submit a check that would clear. A single bounced check would be an unbearable waste of time and money.

Here’s how prominent Indian freelance blogger Harsh Agrawal described the situation:

As a professional blogger, I have accounts on all major affiliate networks… Living in India, I can tell you that receiving foreign payment is a quite a task. For example, we have to wait two weeks to receive a check, and then we have to wait another 20-25 days for the amount to be credited to our accounts… So if a foreign check is issued to me on the 1st of the month, I won’t see that money for 40-60 days. That’s an epic two-month wait-time!

Many in India questioned whether freelance work was worth all the trouble. Even if a check clears without incident, the delay in sending and receiving payment, and the potential frustrations dealing with international postal services, all may be enough to discourage the client from awarding future contracts.

A better payment solution for Indian freelancers was sorely needed.

Fintech disruption and the advent of online payment platforms

The introduction of fintech companies offering online payment services provided needed disruption to these bungling means to get paid. PayPal and Payoneer were the first to open the door to streamlined payments and scores of Indians adopted the platforms as their primary means to get paid. However, the risks inherent to this initial oligopoly of online payment gateways became apparent when the government of India suddenly shut down their operations beginning in 2010.

As reported by the financial press, here and here:

PayPal on Saturday stopped allowing users in the world’s second most populous country to transfer funds directly from one personal account to another. PayPal has also made it impossible for its customers in India to withdraw PayPal funds through a bank, effectively shutting down the only method for retrieving an account’s balance.

Payoneer had to shut down its India operations by 2011 due to certain directives issued by the Reserve Bank of India (RBI).

The sudden and rapid uptake of these online payment platforms caught local governments and the Reserve Bank of India off guard. Outdated monetary policies were unable to regulate digital money transfers, resulting in an inability to claim much-needed tax revenue from this influx of income. In an effort to buy time and get their books in order for their new digital reality, the Indian government froze international transactions, thus severing the financial lifeline scores of freelancers had with their international clients.

Here’s how Harsh Agrawal, Indian freelance blogger, described the situation:

Paypal and Payoneer are the financial backbones of freelancers. However, with the Reserve Bank of India imposing significant limitations to Paypal and banning Payoneer from doing business in India, they are killing the young Indian freelancing community.

Drafting new regulatory oversight procedures took years and proved challenging for PayPal and Payoneer to repackage their services and comply with regulations. As Paypal and Payoneer reestablished themselves coupled with a more stable and clear regulatory environment, additional online payment platforms were able to enter the Indian market, diversifying the fintech landscape in South Asia. New entrants included our company, Payza, where we sought to empower freelancers in India (and elsewhere around the globe) by developing a fast and convenient financial channel for them to get paid.

More than “just a money transfer”

Payza has recently introduced the Bank Transfer Withdrawal option for all our customers in India. This new feature provides our more than 700,000 members in India a convenient way to withdraw Indian Rupees directly to their bank accounts. This at first may seem like a straight-forward feature but in fact, it has broad significance that merits further explanation.

In order to establish this feature in India, Payza executives spent months negotiating behind the scenes with government officials and banking partners to ensure that our bank transfer withdrawal system would meet regulatory requirements and work with the current Indian banking infrastructure. The investment in both time and resources was substantial, but necessary, and will serve to give freelancers in India a more cost-effective way to receive payment for their services.

With local bank transfer withdrawals, an Indian professional can keep more of their hard-earned money. Withdrawing the funds from their Payza account directly to their bank account will cost a mere 60 Rupees as well a 2.5% conversion fee if the funds are received in foreign currency. With lower fees, Indian freelancers have the flexibility to withdraw their payments more often, providing better cash-flow and stability from month to month. Moreover, the process of transferring foreign funds from an international client and having Rupees on hand for purchases now requires a couple days, and there is no risk of receiving a bad check. Along with lower fees, Payza’s platform has built-in tools to help freelancers calculate their tax obligations, removing the guesswork from that aspect of their professional endeavors. This means that freelancers can now spend less time worrying about day-to-day financial obligations and more time competing for contracts and projects. Our feature offers more than just the provision of common banking services: we offer opportunities for broader social advancement.

Our future directions will continue to empower Indian society

This feature was designed with convenience and practicality in mind, and we’re extremely pleased with the results. Based on the early feedback we received, so too appear to be our members. Adoption rates for this new feature have exceeded our estimates: more Indian members initiated a bank transfer withdrawal the first week it was offered than had used the costlier bank wire withdrawal option the week before. As happy as we are with the initial success of this feature, we don’t plan on resting on our laurels. Payza’s future plans for the Indian market include providing citizens with an online payment option for utility bills and government expenses, such as taxes and licenses. Our ultimate goal is to provide average Indians with an efficient means to pay for essential government services that are on par with payment systems in the industrialized world.

The global labor force is digitizing, and the digital revolution is just as important for developing nations as it is for countries with fully developed economies. By bringing secure, convenient, and affordable online payment solutions to India and other emerging markets, we at Payza advance our goal to bridge the gap and create a level playing field for freelancers around the world.