Foreign Online Banks Eyeing the Overseas Remittance Market

KakaoBank Overseas Remittances Surpass 2 Million Transactions
K Bank Launches New Service... Toss Bank Also Considering Entry
Fee Competitiveness Less Than Half Compared to Commercial Banks

[Asia Economy Reporter Minwoo Lee] Internet-only banks such as KakaoBank, K Bank, and Toss Bank are focusing on the overseas remittance market. It is interpreted that they are trying to expand their territory by leveraging lower fees compared to commercial banks.

According to the financial industry on the 4th, KakaoBank's cumulative number of overseas remittance transactions exceeded 2 million as of February. The amount surpassed 2.5 billion dollars (approximately 3.1515 trillion won). This doubled in less than two years since surpassing 1 million transactions in April 2020. Considering that it took about 2 years and 9 months to exceed 1 million transactions since the launch of the overseas remittance service in July 2017, the usage is increasing at a much faster pace. In fact, last year's remittance transactions totaled 560,000, nearly doubling (192%) compared to 290,000 in 2018.

In particular, the trend accelerated after launching the ‘WU Fast Overseas Remittance’ service in collaboration with Western Union, an overseas remittance company, in 2019, allowing users to send US dollars to over 200 countries worldwide within one minute. This service charges a fixed fee of 5 dollars regardless of the remittance amount. The low fee and the ability to remit 24/7, 365 days a year through the KakaoBank application (app) seem to have received great response.

K Bank is also actively entering the overseas remittance market recently. At the end of last month, it started the ‘MoneyGram Overseas Remittance’ service in cooperation with the overseas remittance company MoneyGram. As a result, users can send remittances in 45 currencies including US dollars, euros, and yen in real-time 24/7 to 68 countries including the US, Europe, and Southeast Asia. The fee is also 4 dollars regardless of the remittance amount. Along with the existing ‘Overseas Account Remittance’ service, which has the industry's lowest fee (4,000 won), K Bank plans to aggressively target the remittance market. Additionally, Toss Bank has also announced that it will soon launch an overseas remittance service, intensifying competition.

The reason internet banks are entering the overseas remittance market like this is that they can offer lower fees compared to commercial banks. Commercial banks send money overseas through the Society for Worldwide Interbank Financial Telecommunication (SWIFT). Because of this, telegraphic transfer fees (fees for standardizing domestic bank remittance records to international standards) are added to the remittance fees. For example, when sending 5,000 dollars via Shinhan Bank or Woori Bank, the total fee is 15,500 won, including a remittance fee of 7,500 won and a telegraphic transfer fee of 8,000 won. On the other hand, internet banks connect directly with local financial institutions for remittance, so telegraphic transfer fees do not occur.

A financial industry official explained, "The domestic overseas remittance market, which was at the level of 10 trillion won in 2015, has already grown significantly to about 20 trillion won," adding, "Internet banks, which can offer convenient access and low fees, are eyeing this market as a promising opportunity."