Eastern promise: PayPal’s ambitious plans for Russia

PayPal’s been reacting to pressure coming its way recently in interesting ways — launching its own Square competitor and overhauling its digital wallet. Now it’s also making moves overseas, with news that it’s working on a deal to massively expand its in partnership with Russia’s state-owned postal service.

According to reports in Russian media this week, the U.S. payments service is closing in on a deal to work with Russian Post. Together, they would deliver a co-branded pre-paid banking card attached to a PayPal account, which could be used to withdraw cash or buy goods online.

Here’s Kommersant, which broke the news:

PayPal and the Russian Post discussed the possibility of co-branding issue prepaid cards as “Russian Post-PayPal”, said the head of financial service for Russian Post, Vyacheslav Avdyukov. The card will include a balance added from a PayPal account, and you will be able to use it to pay for goods on delivery from Russian stories, as well as withdraw money from ATMs.

This might not seem like a big deal to those obsessed with the American market. But make no mistake: moving into the Russia in a big way could be very, very important — not just for PayPal, but for the Runet in general.

PayPal originally entered the country in 2006, but it has only slowly — make that very slowly — been expanding what it lets local customers do. Largely reliant on customers with U.S. bank accounts, it was only last year when PayPal users were finally able to withdraw money from their accounts in Russia (not just make payments), before the company suddenly performed an about face and said it had all been a mistake.

But opening up through a partnership makes a lot of sense. Doing it this way avoids some of the regulatory challenges that it might face were it to set up as an independent banking organization; it also gives the company access to immediate distribution and marketing channels. It’s a smarter way to do things.

And it could also give the Russian internet a massive boost by making it much easier for people to buy online — not easy in a country where most online services get paid on delivery of the goods, and pre-paid cards and gift cards are not popular.

The deal is not yet finalized, but reports suggest it’s pretty close to being put in place: the impact will certainly be worth watching.

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