South Koreans will have cheaper and faster option to send money via online platforms instead of going through traditional banks from next month.

The foreign currency transfer service in Korea had to be made through established financial institutions like retail banks. But the Korean government recently revised the Foreign Exchange Transactions Act by easing equity capital requirements for fintech companies to offer a foreign currency transfer service.

The revised bill will allow those having 2 billion won ($1.8 million) or more paid-in capital and a debt ratio below 200 percent to register as small foreign currency transfer agencies from July 18. Nearly 40 fintech firms are preparing to provide their own international remittance services that will start on August 15. The one-off transfer via a fintech firm will be limited to $3,000 or less, and the annual limit is set at $20,000.

The new remittance service by fintech startups are expected to save costs and time significantly on overseas currency transfer, bringing about big changes in the money transfer market in Korea where 10 trillion won ($8.8 billion) worth of international money transfers are made every year and conventional banks have dominated.

Traditional banks currently use intermediary banks on the Society for Worldwide Interbank Financial Telecommunication (SWIFT) for foreign currency remittance, which takes two to three days and service fees amount to up to 6 percent of total remittances. In contrast, users for the new service will be able to send money to foreign countries on the day using mobile foreign currency transfer agency at a cheaper fee of about 1 percent.

By Chung Ji-sung

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]