After spending a lazy weekend yesterday, I booted up my computer in the evening and found out the shocking news that Payoneer prepaid cards have been frozen worldwide. This meant hundreds of thousands of IT professionals and freelancers in Bangladesh suddenly lost access to their money. But in an even more significant blow, they are suddenly unable to pay for hosting, software license, and other online subscriptions that are crucial for personal and business needs.
The news worries me because I’m one of the people whose lives have been made better by Payoneer’s services. Not only do I stand to lose thousands, but my hands will be tied if Payoneer services were to be stopped.
By the looks of it, it does feel like we’re heading towards that direction.
If you haven’t heard of Payoneer before, you may want to know a bit about it. So let’s start there. You can skip to “Why Bangladeshi credit cards are crippled” or to “What’s happening with Payoneer accounts” if you already know about Payoneer.
What is Payoneer?
Payoneer is a global payment solutions provider that allows individuals to send and receive money. Popularized by freelance marketplaces like Fiverr and Upwork, Payoneer provides an easy way to receive funds from various online marketplaces. It also allows you to accept payments from clients worldwide.
The company acts as an intermediary by receiving funds and holding them until you either withdraw them to your bank or spend it in another way. That’s where its most significant feature comes into play.
With every Payoneer account, you can request a Payoneer Prepaid MasterCard. In my opinion, it is the most useful feature of Payoneer that made it so crucial for IT professionals in Bangladesh. This prepaid card lets you spend money online and at POS points. As it’s an international prepaid card, you can use it online for paying domain-hosting bills, software subscriptions, and even use at ATMs and POS machines when traveling abroad.
In the past decade, I have used my Payoneer prepaid cards more than I’ve used any other bank card combined. If you ask around, you will find plenty of people like me whose primary way of paying online bills is to use their Payoneer prepaid card.
Why is this? Why aren’t credit cards issued by local banks more popular when they are supposed to be more secure and provide more benefits such as reward points?
You can blame the stupid limitation imposed by the central bank for that.
The problem with credit cards in Bangladesh
This section is important for non-Bangladeshis to understand why Payoneer prepaid cards are so popular and provide a vital service to thousands of people in Bangladesh. If you’re already a Bangladeshi, you can jump to the next section, what’s happening with Payoneer.
For starters, getting a credit card in Bangladesh is not an easy task. Especially for self-employed/freelancers, banks don’t consider them as ‘salaried’ even if they earn the same amount of money every month from their overseas clients. So, to obtain a credit card, more often than not, you have to open a fixed deposit (FDR) account.
From there, the limitations begin to apply. Here are four limitations, with the latter two being the most non-sensical.
Travel quota: A Bangladeshi individual cannot spend more than $12,000 abroad in a calendar year (unless there are registered business needs like an export-import business that warrants it). This amount has to be ‘endorsed’ on the passport every year.
I’m okay with this yearly limit as it’s a generous amount. But it could be a limiting factor depending on how often you travel and how much you need to spend abroad.
Limit on credit card balance: This one is connected to the amount you have on your FDR (or the total credit limit). For example, if you open an FDR for BDT 100,00, you will likely have access to BDT 92,000. If you convert that to USD, that’s a little over $1000.
You have to explicitly convert the amount you want to avail in USD (known as the foreign currency part) over the phone. I’m also okay with this limit, as it makes sense to me.
No more than $300 for online payments: This one is the worst offender. While paying in person via POS machines allows you to go up to your total credit limit, if you’re paying online, you can’t pay for more than $300. And every time you pay more than $300 (even in separate transactions), you have to call the bank ask to allow another $300.
I once contacted my bank asking how I could pay for a software license that would cost me more than $300 over a year. With obvious disbelief and sarcasm in her voice, the lady on the phone asked, “Are you telling me that you really need to pay more than $300 for software license in a year?”
You can call the bank and tell them you are paying for hotel booking, which gives you the ability to pay up to $1000 in one transaction, but without lying about it, you really can’t pay more than $300 at a time online. Think about that for a moment. You can have a credit limit of over $3000, but you won’t be able to pay $301 in one transaction.
Even in separate transactions, say you pay for three things each costing $100, you would need to call the bank to open another $300. That’s how stupid and absurd the limitations are over here.
Places where I’ve used a Payoneer prepaid MasterCard.
Recurring subscription: (Non-exhaustive list)
- Domain registration fees
- Hosting at Cloudways (Has to be paid on a monthly basis)
- Grammarly Premium
- G Suite
Once-off payments: (Non-exhaustive list)
- Occasional WordPress theme and plugin purchases online (Sometimes they are recurring subscriptions too)
- Buying Mac software from time to time (CleanMyMac, iStats Menus, 1Password, etc.)
- Games from Steam and GoG.
- In-flight WiFi purchase (I’ve purchased it many times during cross-Atlantic flights)
- Uber Eats and Uber ride payments while traveling abroad. (Can’t use a Bangladeshi credit card because it’s annoying.)
- Purchasing movie tickets online while abroad.
- Literally making any kind of payments online. I’ve always used the Payoneer prepaid card — whether in Bangladesh or abroad — because it’s easier and is not plagued by limitations.
- Even when making large purchases while in Bangladesh ( Such as when buying the iMac), I paid with the Payoneer card because none of my bank cards have a high enough limit to pay for it.
Last year, when trying to book a US domestic flight on Delta, I couldn’t pay the airfare of about $400 using my credit card because of such limitations. There are tons of other such instances (like a tool that I use has a yearly subscription fee of $300+). Needless to say, the Payoneer prepaid card was the only way I was able to pay for them.
A limit on how many times you can pay online: When paying in USD, there is another limit, the most annoying limit of them all. You have to open up the number of times you want to pay online. So, for example, if I ask them to allow ten transactions, it means I can call Uber (when abroad) 10 times. Before I can call another Uber for the 11th time, I have to call the bank again.
The reason it’s the most stupid is that you can’t really keep count. If you call Uber and decide to tip your driver after the ride, there goes two transactions instead of one. Think of how many times you are going to need to pay online for a two-week trip abroad. Does it really make sense to ask the bank to allow precisely that many transactions? The same goes for monthly subscriptions you may have. It just doesn’t make sense.
I guess I see the security aspect of it, but for people like me who have regular recurring subscriptions, the lack of an option to turn that off is annoying.
An imaginary use case of how these limitations affect you.
Say that you want to pay for $400 in one go. You are out of luck.
Say that you want to pay $400, but on 5 separate occasions. You call the bank and ask them to open up five transactions, but you only get $300. So you make your transactions and after you reach $300, you need to call the bank again to allow another $100. (You can request up to $300 at a time for software licenses.)
Say that you want to pay $400 but in 3 transactions. You call the bank and open $300 and 3 transactions. You pay twice and spend $200. Now you realize you need to pay two more times. But you only have one transaction remaining. You call the bank and ask them to allow two more transactions, so you have a total of three. The bank allows it. You pay $100 in two separate transactions. Now you need to make your third payment of $100, but you’ve reached the original limit of $300. So you need to call the bank again and ask them to allow the remaining $100 transaction.
The thing to realize here is that some card holders may be exempt from this (such as ERQ card holders) but I’m not counting them as you need to have special circumstances to have those privileges. I’ve held two credit cards from two major private banks in the country and I’ve had similar restrictions from both of them.
As you can see, credit cards issued by the banks in Bangladesh are plagued with stupid limitations. I know many people who have credit cards from major banks but don’t use them nearly as much precisely because of these limitations. Instead, they opt for their Payoneer prepaid card.
I do the same. The only reason I got a credit card was that it was needed for renting a car abroad. As car rental companies don’t accept prepaid cards, I needed to have a credit card. And, no joke, that’s pretty much the only thing I’ve used my credit card for when traveling abroad.
What’s happening with Payoneer accounts?
Now that you understand how Payoneer prepaid cards are essential for many professionals, including myself, who live in Bangladesh, here’s why the future looks bleak.
I will try to describe what I understood to the best of my knowledge. And given that it’s a sensitive topic that many people are losing their sleep over, I’ll also try to answer some of the most common questions that may arise.
The Wirecard saga, in brief
Payoneer works with various companies across the world. To facilitate the Payoneer prepaid cards, the company partnered with Wirecard Card Solutions Limited, a subsidiary of Wirecard AG.
The problem began with a series of accusations against Wirecard. Its auditors discovered a staggering $2.1 billion accounting hole in its books. You can learn more about the issue in this TechCrunch article, but the short of it is that Wirecard AG has applied for insolvency in Germany.
As a result of that, the UK’s financial authority FCA has frozen all Wirecard Card Solutions Limited activities. That means all the cards issued by Payoneer — because they were really issued by Wirecard Card Solutions Limited — are now frozen.
For many freelancers around the world, this means their money is now stuck on Wirecard, even though they only dealt with Payoneer and possibly never even heard of Wirecard.
Is all the money from Payoneer accounts gone?
While the fate of the funds stuck on Wirecard-issued prepaid cards is yet to be determined (more on that later), an important thing to remember is that not all of the money on Payoneer accounts is lost.
Payoneer works in a way where only part of the fund is loaded onto the card. This is called the card limit. Different accounts have different card limits. For example, if your card limit is $5000, and you had $10,000 on your account, only the fund within that card limit is currently frozen. The remaining $5,000 can be withdrawn to a bank because that fund is being held by Payoneer, and they are not under investigation.
Unfortunately, that means if you have a smaller amount on your account, like $1000, you can’t withdraw that fund while the FCA’s freeze is in effect.
Is it Payoneer’s fault? Is Payoneer under investigation for fraud?
No. Payoneer is not under investigation for fraud.
As much as we may be quick to blame Payoneer for this, It’s important to understand that it’s not Payoneer that’s being investigated. It’s a third-party company that Payoneer partnered with to provide the card services.
However, I wonder if Payoneer did its due diligence before handing over their customers’ money to Wirecard.
In the news published on the FCA website, this section warrants special attention:
Is there a chance I won’t get my money back? What is safeguarding?
Safeguarding is a key consumer protection measure within the EMRs and the PSRs. The purpose of safeguarding is to protect and return customer money if a firm was to fail.
Wirecard is required under the EMRs to maintain appropriate measures to safeguard customers money. It does this by holding it separate from its own money in accounts with banks (or another credit institution). Effective safeguarding arrangements are critical to help ensure that customers’ money is protected and returned if a firm fails. Adequate safeguarding arrangements which are compliant with the regulatory requirements are a condition of Wirecard’s ongoing FCA authorisation.
That sounds like your money is safe and you will get it back because Wirecard was ‘safeguarding the money,’ right?
Well, here’s what Payoneer wrote on its official email to its customers late last night:
“We believe that cardholder funds are properly safeguarded and that the freeze will be temporary.”
Why does the company “believe” that the funds are properly safeguarded? Wasn’t it Payoneer’s duty and responsibility to ensure that it was safeguarded?
Note this from Payoneer prepaid card’s terms and conditions: (Highlights are mine)
The Prepaid MasterCard is an electronic money product and although it is a product regulated by the Financial Conduct Authority, it is not covered by the Financial Services Compensation Scheme. No other compensation scheme exists to cover the losses claimed in connection with the Prepaid MasterCard. This means that in the event that Wirecard Card Solutions Ltd becomes insolvent Your funds may become valueless and unusable and as a result You may lose Your money. However, as a responsible e-money issuer, Wirecard Card Solutions Limited ensures that once it has received Your funds they are deposited in a secure account, specifically for the purpose of redeeming transactions made by Your Prepaid Card. In the event that Wirecard Card Solutions Limited becomes insolvent funds that You have loaded which have arrived with and been deposited by Wirecard Card Solutions Limited are protected against the claims made by creditors.
Like many other customers, I’m confused. Is the money protected or not? Because first, it says the funds may become valueless and unusable, and we may lose the money. But then it says, the funds are protected. So, which is it?
Payoneer, of course, has not made it clear yet, and their email communication’s choice of words only further confuses customers like me.
The ongoing crisis may not be on Payoneer’s end, but I hope that they did their due diligence in dealing with the money their customers trusted them with. I have not had any negative experience with Payoneer so far (other than super delayed customer service response times), and I’m giving Payoneer the benefit of the doubt here.
But I do hope they weren’t just not paying attention to Wirecard’s situation beforehand. I’ve read that the Wirecard situation has been ongoing since 2019. It’s impossible to think Payoneer didn’t get a wind of this and that they are only thinking of contingencies now after all hells have broken loose.
Can you still receive payments via Payoneer from marketplaces and clients?
As Payoneer put out on its email, new funds you receive from clients or via marketplaces will not be loaded onto the card. That means they will be held on your Payoneer balance, and you will be able to withdraw the funds directly to your bank. You just won’t be able to use the funds that are already on your card, and you won’t be able to add more funds to your card while the freeze is in effect.
However, as people have pointed out on Payoneer groups, withdrawal to bank accounts is currently not working. Between that and Payoneer’s less-than-ideal choice of words in their email, the company isn’t exactly blasting people with confidence.
They published a blog post that was last updated on June 25, where they wrote, “As they are independent, your card is not impacted and you can continue to use it as usual.”
Of course, cards are now frozen. They have not updated the blog post to reflect that. And the blog post is mysteriously not available anywhere on their blog’s homepage.
The future of online payments for people living in Bangladesh
For many people, this financial blow couldn’t have come at a worse time. My newsfeed on Facebook is full of shocked and speechless people as their entire month’s income (and maybe more from previous months) are stuck on Payoneer. It is not the situation people needed to be in the middle of a pandemic.
I stand to lose thousands of dollars as well if the funds were to vanish. But strangely, I’m more worried about the future of online payments than losing the money at a time.
We live in a world where paying online is a basic task. More so for people who work on tech. Maybe I could get rid of things that aren’t strictly needed, like Netflix, but how about the hosting fees every month? How about the domains that renew at different times of the year? How about other software licenses that I don’t necessarily have to pay for (I could just use the pirated version), but I still do because that’s the right thing to do?
The immediate shockwave for many of Payoneer’s customers worldwide is the possibility of a considerable loss of money. But the aftermath for us unfortunate Bangladeshis will be worse. That is what I fear. Between the central bank’s stupid restrictions and the lack of any Payoneer alternative, the future is really grim.
Have you been a victim of this situation? Feel free to share your comments below.