Kakao Bank to challenge traditional banks with cheaper overseas transfer fees

2017.07.24 14:15:52 | 2017.07.24 14:16:27

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Kakao Bank, which begins operation as South Korea’s second internet-only bank this week, has introduced offshore wire transfer services that its customers can use at one-tenth the cost of traditional commercial banks.

Sending money overseas via a brick-and-mortar bank entails a string of commissions, including transfer fees, cable charge, intermediary fees and recipient fees. Wiring $5,000 through an offline bank would cost 55,000 won ($49) in commission fees, but for Kakao Bank users, this cost would be slashed to 5,000 won, Kakao Bank said on Sunday.

Kakao Bank has successfully lowered its commission fee by using Citigroup’s WorldLink payment services. Most commercial banks currently use the international payment network called SWIFT, which charges a number of commissions as a transaction involves several intermediary banks. In WorldLink, however, these fees can be significantly reduced because the payment only goes through Citigroup.

But WorldLink’s coverage is not as wide as that of SWIFT so that Kakao Bank customers would only be able to transfer money to the 22 countries that currently support WorldLink, which include Japan and the United States. Payments to countries such as China, Vietnam, Indonesia and those in Latin America and Africa would have to be made through other banks.

Kakao Bank, which will be the country’s second internet-only bank following K-Bank that began services in April, will kick off its official operation on 27 July. Eyes are on whether Kakao Bank, a consortium led by the country’s largest messenger app operator Kakao Corp., would repeat the success of K-Bank that already exceeded its full-year target of 1 trillion won in deposits and loans in just 70 days of service.

By Chung Ji-sung

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