Reforms make sending money abroad easierForeigners working in Korea can now send as much as $20,000 a year of their earnings back home using mobile apps like KakaoTalk instead of having to walk all the way to the bank to make a transfer. The single-transfer limit is $3,000.
According to the Ministry of Strategy and Finance on Tuesday, the reforms to the law covering foreign exchange transactions to allow nonbanking financial companies - including fintech operators - to participate passed the Cabinet meeting.
The Finance Ministry first proposed the reforms in December.
One of the changes lowers the minimum capital requirement for nonbanking financial companies to participate in the foreign exchange transaction business. The capital requirement has been lowered from 1 billion won ($832.7 million) to 300 million won, which allows smaller companies to offer the services.
“The financial burden of commission payments on foreign exchange transactions will be lessened as other operators like fintech companies will be allowed to participate,” a ministry official said.
It currently costs between 30,000 won and 40,000 won to transfer up to 1 million won abroad, according to the ministry.
The ministry, however, said it has decided to limit the amount that can be transferred to ensure banks are not overly affected.
The oversight and management of the foreign exchange businesses will be exclusively handled by the Korea Customs Service. Until now, the responsibility was split with the Bank of Korea. This new system will take effect on April 1.
The eased regulations reflect today’s rapidly changing financial industry. In recent years, financial transactions made via mobile services have been growing substantially.
Earlier this month, the Bank of Korea announced that for the first time, financial transactions made via the Internet and mobile devices have reached a daily average of 40 trillion won, while subscribers to such services exceeded 100 million users. A single person can open multiple accounts.
Mobile banking has been growing at an especially high rate.
Last year, an average 2.5 trillion won in transactions were made via mobile banking every day, a 36 percent increase year on year. Mobile banking now accounts for 54.3 percent of all electronic banking services, including those made online. Smartphone banking subscribers stand at nearly 65 million won, an increase of 34.4 percent year on year.
Mobile banking isn’t the only service that has been growing.
Foreign exchange transactions have been rising rapidly in recent years. According to the Bank of Korea, the daily average for foreign exchange transactions reached its highest in seven years last year at $48.4 billion, an increase of 8 percent compared to the $44.8 billion made in 2014. The last time daily transactions hit this level was in 2008.
The direct won-yuan exchange market that opened up in Seoul in late 2014 has also contributed to the rise.
Foreign exchange transactions made in Korean commercial banks rose 12.1 percent from the previous year to $22.8 billion. Foreign banks also enjoyed an increase of 4.6 percent in foreign exchange transactions, hitting $25.6 billion.
BY LEE HO-JEONG [firstname.lastname@example.org]