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Paypal remit problems for Indian firms and its broader implications

Paypal has recently stopped allowing Indian providers to receive funds from other paypal account holders and it is also voiding the withdrawal of funds by Indian establishments to their Bank A/c’s in India. This is a double whammy by Paypal as most small to medium web dev shops and freelancers in India depend on Paypal for receiving payments from their clients abroad. Also, the way Paypal has handled this situation is a bit appalling. Rather than intimating the Indian account holders in advance and assuring them of a resolution, they are first reversing the received funds back to the users and *than* informing the sellers of this issue. While I am sure Paypal is working hard to resolve this issue as they have the financial strength and their brand image to safeguard, this raises some valid questions on how reliable are these online service providers in India. If this can happen to Paypal, what stops Gmail, Facebook and other such online providers from blocking access to their services to Indians? As these firms are operated from outside India and are not governed by Indian laws and regulations, their failure to comply with any present and future law and regulations in India, might force them to rescind their services to their users in India. My advice for avoiding such a situation from adversely impacting your business would be to read the fine print for all such online services which your business depends on and have a Plan B in place in case these services are unavailable one fine morning, as in the case of Paypal. Update: The head of Paypal APAC region has posted an update on this issue, whch can be viewed at www.thepaypalblog.com. There has been quite a bit of criticism for the post on Paypal, which can be viewed on the EvenHorizon1984 Blog.  
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