Reforms free up fintech firms to transfer funds

Fintech operators like Kakao will soon be permitted to both exchange foreign currency and wire money overseas without partnering with a bank, and customers will be able to transfer as much as $100,000 each year without reporting the transaction, thanks to a new reform bill.

Once the reforms are implemented, overseas transfers via smartphone messenger are expected to surge.

The Ministry of Strategy and Finance on Tuesday said it will be collecting public opinion on the bill until July 25, when it will finally be implemented.

Under current law, only financial companies are allowed to exchange foreign currency and only banks can wire money internationally.

In March, the government eased regulations to allow nonfinancial companies to wire small amounts of foreign currency as long as they partner with banks. The amount was limited to $3,000 per transaction and up to $20,000 a year.

Consumers are currently charged a commission by banks even when sending money through a messaging app. With fintech companies as the sole service provider, the commission charge is expected to be lower.

The government has also decided to expand the amount of foreign currency that can be wired overseas without reporting it to the government.

Consumers currently do not have to report transactions less than $2,000 and which do not exceed $50,000 each year.

The government is also planning to ease regulations on buying property overseas.

Under current law, people who want to buy property abroad have to wait for approval from a foreign exchange bank or the central bank before concluding the transaction.

Now buyers must only report the intention to buy property to the bank or the central bank.

But as it has eased regulations, the government has also decided to increase penalties for violators.

Currently, those who violate the foreign exchange law are subject to up to three years in prison or a fine of up to 300 million won ($254,000). This will be increased to up to five years in prison or a fine of up to 500 million won.

“Individuals and companies will experience the convenience from the simplified foreign exchange process including wiring overseas once the reform bill passes,” a Finance Ministry official said. “The customers will not only have more options but will also enjoy the benefits in cutting costs, as even nonfinancial companies like fintech operators will be able to provide foreign currency wiring services.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]