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Overseas remittance rule overhaul intensifies competition among banks
Exchange rates are displayed at a currency exchange booth in Seoul, Nov. 30. Yonhap
By Jun Ji-hye
Competition among banks in the cross-border transfer market is expected to intensify as the government announced a sweeping overhaul of the overseas remittance framework set for next year, industry officials said Wednesday.
In particular, internet-only banks, known for their streamlined processes, are poised to take on a more prominent role.
On Monday, the Ministry of Economy and Finance said it will introduce the Integrated Overseas Remittance Management System in January, enabling real-time, unified oversight of no-documentation remittances handled by both banks and other financial firms.
Under the current Foreign Exchange Transactions Act, individuals can remit more than $5,000 per year without supporting documents only through a designated bank, with a limit of $100,000. Other kinds of financial firms such as securities companies allow no-documentation transfers of up to $5,000 per transaction and up to $50,000 annually.
Starting in January, however, the annual limit for no-documentation overseas remittances will be standardized at $100,000 across all types of financial institutions. The designated bank requirement will also be abolished, allowing individuals to use multiple banks and to send up to $100,000 per year without submitting supporting documents.
Amid the regulatory easing, banks are moving quickly to attract customers seeking overseas remittance services.
Kbank will cut its fees for overseas account transfers via SWIFT and ACH to a flat 4,000 won ($2.7) from Jan. 1 to June 30 next year, about half of what it currently charges for transfers to the United States.
Toss Bank revised its foreign currency account terms on Dec. 2, expanding beyond a system that allowed transfers only between its own foreign currency account holders. Starting next month, it plans to offer direct transfers to bank accounts in major overseas markets.
The removal of the designated bank rule marks the first such change since the Foreign Exchange Transactions Act was enacted in 1999.
With the reform, customers will have more freedom to choose among banks and financial service providers, hopefully prompting intensified competition and resulting in lower charges, an expansion of supported destination countries and enhanced user convenience.
“Overseas remittances have long been funneled through designated banks, creating a structure where customers were essentially locked into a single institution,” a banking industry official said. “The latest reform opens up a landscape where consumers can choose from a much wider range of providers.”
The finance ministry said the reform will also significantly enhance convenience for a wide range of remittance needs, including tuition and living expenses for students abroad, payments for transnational online purchases and small-scale trade transactions.