Mexico is making some big changes to combat the “underground” economy. There are many things in the works but one in particular just hit yesterday, September 26, 2109. If you had a Mexican Paypal account you were probably surprised when early in the morning, without notice, there was a transfer of your entire balance to the primary account you had linked.
This change was due to the Mexican government telling Paypal that they would no longer be allowed to carry balances for their Mexican customers. This was, of course, an effort to crack down on those that were collecting money with Paypal but not paying taxes. This is because the tax authority in Mexico highly monitors bank accounts in the country but does not have the same access to this information from Paypal. This move surely worked somewhat for the government as I imagine there were many who had large Paypal balances which were transferred in the middle of the night to their highly monitored Mexican bank accounts.
Other than the Paypal users who were caught with their pants down, the consequences of this change will be felt by Paypal and their Mexican customers. Without being able to hold a balance, Paypal is simply a transfer service. Formerly, you could also hold foreign currency and decide when you were ready to transfer it. Now, foreign currency is automatically transferred at an unfavorable conversion rate. Many people such as gamers, YouTubers, traders, and online workers use mainly US dollars and really have no reason to use Paypal at this point.
There are many new Fintec companies that can easily take their place. I recommend Transferwise for those that need a multi-currency account with low international transfer rates but there are also other options.
The Ongoing War on Cash and Technology
The majority of the Mexican economy is still informal, which simply means that it does not run through the national banking system. The Mexican government, just like all governments throughout the world, want to stamp out what they cannot control and take from, and this is a further attempt to do just that. Many things will be released in the coming months such as the new federal tax bill to be approved soon and
The governments are in a scramble to keep up with and clamp down on the new technologies that allow people to trade freely with one another. Sure, there are some people that will use those tools to commit unscrupulous acts, but the same can be said of the tool of government itself. Access to new technology and innovation is without a doubt an overall plus to
What are some good substitutes for Paypal? What do you predict to be some of the other consequences of this change? Let us know in the comments below.