racoma.com.phJ. Angelo Racoma on technology, economics, writing, problogging, and getting things done

Paypal users from the Philippines have reason to rejoice: PayPal now allows Philippine-registered accounts to receive funds. Check out Pinoy Money Talk for more information. I’ll be posting more about this soon.

I’m still playing around with my local account. So far, I cannot register with a local bank (only US banks are enabled for receiving funds), so the only way to actually receive money is to credit the funds back to a debit/credit card. Still, being able to receive money easily would be a big boost to business here, especially for those who have clients from abroad (like freelance writers, designers, bloggers, etc.).

We’ve read about horror stories all too often. AdSense checks get delayed, and before you know it, the check has already been deposited and the funds have cleared (the AdSense control panel gives you information on clearing date). In short, someone has stolen your AdSense check. They’re either from the postal service, or someone who was able to intercept your check en route to your mailbox. Chances are, they’re in cahoots with bank employees, or are able to create fake documents to impersonate you, in order to deposit these checks, which are crossed (marked for deposit to payee’s account only).

That was before, when Google sent checks directly from an office offshore. The alternative was courier service. You get the checks 3 days after being issued, but you have to pay $24 (about PhP 1,200). It sucks. I know—I’ve tried it, but that was after asking for a re-issue, when I suspected my check was lost or stolen. This is a good idea for those who put their checks on hold until the account accumulates money, or for those who get big amounts regularly.

When I got my check in the mailbox yesterday, though, I was surprised to see a local return address attached to the envelope: APCEI Logistics, Inc. It was printed on sticker paper, and slapped on top of the Google Mountain View, CA address. Also, the postmark says April 23, 2007—just two days from the date of my receipt (and almost a full month after my check was issued by Google). This indicates that Google is likely sending checks to the Philippines in bulk, and then someone here is handling the mailing for them.

Here’s the return address.

And here’s the postmark.

I’ve sent an email to Aileen Apolo, Google’s country consultant here, to ask whether there are changes in how Google handles AdSense checks here. Hopefully this will mean we can have more options soon, like cheaper courier service (anything cheaper than $24 a pop would be great) or even electronic funds transfer like what they have in the US.

Heck, even receiving the checks via regsitered mail would be okay with me. At least this way, your check doesn’t have to be carried by the postman and left at your door/mailbox/gate. Instead, you would have to claim it at the post office by presenting a valid ID. I know this is still not as secure as EFT or DHL. Even having a courier service handle your packages/letters/checks isn’t a 100% surefire way to be safe. But at least these add a few more layers of protection.

I also emailed APCEI, and I’m waiting for their response as I type this. I do hope this is good news for AdSense publishers in the Philippines who are worried about the safety of their checks. And I do hope there’s more in store for us.

One of the benefits of blogging for advocacy is the attention one gets from the movers and shakers. My being part of the PayPal for the Philippines campaign has caught the attention of execs in the electronic payments industry, as well as business owners who are into e-commerce (either planning to start selling online, or already have ongoing e-commerce setups). In fact, whenever I attend EBs and blogger get-togethers I’m usually referred to as the PayPal guy. It’s good to be identified with something.

I had dinner—and a few beers—with the top honchos of YES Payments last night to discuss the possibility of their offering P2P e-payment facilities in the country. This is my second meeting with them, so far, and it was great that we were able to exchange ideas freely. I related the needs of the freelance/problogger/developer community in the country, and they told us about the issues that e-payment providers continually face in the line of their doing business.

It’s All About Risk!

The foremost concerns of any business doing e-payments are security and fraud. When money is involved, there is always the chance of one party defrauding another party, or one party defrauding the system itself. So there is always risk. And the issue is determining which party bears the risk, for the system to work. In some cases, it’s the seller that bears the risk. In some, it’s the operator of the e-payment facility.

Fraud can be perpetrated a number of ways.

• Buyer uses stolen card/card details. Card owner disputes. Chargeback is paid (paid back by seller). If the seller has already sent the goods, it’s his loss.
• Seller does not send the goods or goes under. Card owner disputes. Chargeback is paid by the facility. It’s the facility’s loss.
• Buyer uses legitimate card to pay for transaction. Seller sends the goods. Buyer receives the goods, but claims otherwise. Buyer files a dispute. Seller pays chargeback thru the facility. It’s the seller’s loss.

There are even more ways—don’t get any ideas from me! The point is that there are loopholes that can be exploited. So there the system has to consider the trust factor.

For the most part, dealing with the risk is a big headache to the e-payment facility because of regulatory requirements. I never realized that the banking system asks so much of these companies—there are big guarantees, there are limitations, and there are requirements for compliance with several laws, both local and international. And even the card companies like Mastercard and Visa require a lot, such as security of transactions, regular auditing and subscription costs—something in the range of $15,000 per year (or is it monthly?), which, while affordable to big companies, can be a steep amount for small players.

Social Engineering

On top of these risks, there is one difficulty faced by e-payment businesses particularly in countries like the Philippines without a strong judicial system. Fraud is not so difficult to detect. YES cites cases where fraudulent transactions were flagged, but allowed to push through so the perpetrators can be caught in the act. The problem is once the criminals were caught, the inefficient and corrupt judicial system was not capable of warranting adequate punishment.

Hence, perpetrators can expect be let go with just a slap on the wrist. I can also imagine cases where either the judges or the police personnel could be bribed.

We come back to the issue of risk. E-payment facilities may not be so keen on setting up shop here because they know the risk of fraud is high. Even worse, the risk of fraud not being properly addressed by the law is even a bigger threat. Fraud can be minimized if the legal system is good enough to be a deterrent to people planning to commit crime. But if one knows the system can be gamed, then people will go lie, cheat and steal their way to getting a fast buck.

A Problem of Circularity

So which came first? The chicken or the egg? (Sorry for using a cliché—it sucks, I know.)

I earlier made a bold claim that having good e-payment facilities here in the country—particularly PayPal—would be beneficial to the Philippine economy. However, it turns out that most players (probably PayPal included) would only be open to servicing the country if they can be mitigate or minimize the risks of fraud.

Perhaps for large players like PayPal it’s a bit easier. For small players, it could be a challenge.

Facilities for SMEs and Individuals

YES is considering opening a facility for P2P transactions for the purpose of business and commerce. While they don’t have such a system in place right now, they do have YES Payments for SMEs and YES Pinoy for remittance. None of these services can be used by individuals like myself for receiving payments for goods or services rendered, though. YES Payments works for businesses (well, this does not preclude individuals or groups of individuals from registering as a business). YES Pinoy, meanwhile works for P2P transactions between people with existing relationships—you have to prove you’re related to the person sending money, whether he/she is a family member, relative or friend.

I had been mentioning existing services that could do P2P, like Xoom, which fellow problogger Abe has been recommending, and which I’ve also been using. YES is positioning itself as a strong player in the country because of its presence and support. They actually do have an office here, and they do accept support calls. I think that’s an advantage. I actually tried calling Xoom support once thru their 1-800 number, but since they’re based in California, their office hours are quite off when calling from the Philippines.

What’s Next

If—and once—YES gets their planned P2P service up and running anytime soon, would there be people willing to be part of a test group? Just tell me, so we can make the necessary arrangements.

As for PayPal for the Philippines, it’s a continuing advocacy. PayPal may have already set up here, but it’s still very limited. We can only use the service to pay or send money online, and not receive (not even to load up the account). We’re still pushing for full functionality. If you have not yet signed up, please do so. We would also appreciate any support (such as linking to us and/or displaying our banners).