“PayPal, the online payment system owned by eBay Inc., has reportedly stopped allowing personal money transfers to and from India.

TechCrunch and Moneylife report that the move has suddenly cut off the preferred payment method of thousands of Indian users, including man IT software coders working for companies in Silicon Valley and elsewhere around the world.” (Source: Silicon Valley/San Jose Business Journal.)

Here are three plausible hypotheses about the reason for this move:

1. There’s a technical issue.  For example, the volume of personal transfers may have been slowing the speed of commercial transactions.
2. Some customers may be using personal transfers as a form of disintermediation, bypassing traditional financial intermediaries to handle foreign exchange conversions themselves.
3. Arbitrage is another possibility.  Paypal may have been offering lower foreign exchange transaction fees or the Paypal exchange rate may have been misaligned with market exchange rates.

I”m sure my readers will come up with other possibilities.  I suspect we’ll know the actual reason by Tuesday or Wednesday (Feb. 9 – 10).