According to The Korea Herald, officials at South Korea’s Financial Supervisory Service (FSS) announced last week that they expect approximately 40 FinTech firms to provide international money transfer services starting August 15. The FSS will provide permits to companies that facilitate small transfers of funds.
Per Yonhap News Agency, South Korea’s international money transfer market currently totals approximately 10 trillion won ($8.7 billion). Opening the market to FinTech firms will encourage competition and drive down costs to consumers since the companies can offer money transfer services at much lower prices than traditional banks. The availability of FinTech companies for international money transfer services should lessen commissions paid by customers to intermediary firms, and thereby attract more business overall.
Single transfers via FinTech firms will be capped at $3,000, and individual annual limits will be set at $20,000. For FinTech firms to qualify for the FSS permit, they must possess 2 billion won ($1.77 million) and a debt-equity ratio below 200 percent. However, in May, Pulse reported that the South Korean Ministry of Strategy and Finance would reduce the capital requirement through a revision in the Foreign Exchange Transactions Act since many FinTech firms would have been unable to meet the higher standard. It appears that this capital requirement will be lowered to 1 billion won ($885,330) on July 18.
The FSS will allow FinTech firms to use pooling, pairing, and cryptocurrency for their international money transfer services.
Over the last several months, cryptocurrency has consistently traded at a premium in the South Korean markets. While this price disparity has shrunk over the last month, the emergence of cryptocurrency enabled international money transfer services in South Korea should help bring the country’s digital currency markets into equilibrium with the rest of the globe.