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Sending Money Abroad and Fintech Companies

When we send money abroad with traditional Japanese banks, they charge various fees, including remittance fees, lifting charge, and recipient/intermediary bank fees. Worst of all, when we send Japanese yen to bank accounts denominated in a different currency, they charge hidden fees by applying their exchange rate in the name of TTS, adding their fees on the interbank exchange rate.

Thanks to fintech startups, we now have several options to send money abroad. Among other news, Revolut has recently launched its service in Japan, and the relevant regulations are to be eased next year.

TransferWise

TransferWise, a UK fintech company, has been providing its service in Japan since 2016. So, you might have already used their services.

They are using an innovative way to transfer money from one country to another country. They do not move money cross-border. For example, if we send JPY1,000,000 to a person in the UK, we transfer the fund to TransferWise’s account in Japan. Then, TransferWise sends an equivalent amount in GBP from its bank account in the UK to the recipient’s account. So, there are two domestic transfers but no international transfer. Clever.

TransferWise, of course, charges fees for their service, but they are much cheaper than those charged by traditional banks. In particular, when we send JPY to bank accounts denominated in a different currency, they use the real exchange rate, not TTS.

The problem is that we cannot send money more than JPY1,000,000 with TransferWise in this way.[1] That is due to the Japanese regulation. However, that will be eased next year. I will explain this later.

Note:
[1] They can send money more than JPY1,000,000 in a traditional way, using SWIFT. However, as it is an ordinary international transfer, they will charge the same as other conventional banks.

Revolut

Revolut, another UK fintech company, launched its service in Japan in August this year. With Revolut, you can instantly send money to Revolut users at home and abroad free of charge.

You can also send money to other bank accounts from a Revolut account. The fee structure is rather complicated. In the case of the Standard Plan in Japan, it appears that we are allowed to make an overseas transfer free of charge once a month.

Like TransferWise, their terms say as follows:

Please note: Payments to/from Revolut users registered in Japan are capped at one million yen (or at an equivalent value in other currencies) per transaction due to local regulations. [2]

Their terms are somewhat complicated. I sent little money to Hong Kong with it as a test. While they didn’t charge any fee on my side, the recipient bank charged. The information above is based on my understanding of their website as at writing. If you are interested in their service, please confirm the terms yourself and use it on your responsibility.

Regulations in Japan

In the first place, neither TransferWise nor Revolut have a banking license in Japan. As far as I’ve researched online, Revolut has a banking license in Lithuania only, and TransferWise doesn’t have one in any country. Therefore, while they are often described as ‘challenger banks’, legally speaking, they are not a ‘bank’.[3] They are even distinguished from ‘online bank’ such as Sony Bank that has a banking license.

Instead, they are registered as a ‘Funds Transfer Service Providers’ in Japan. With the registration, they are allowed to provide a fund transfer service up to one million yen.[4] The same regulation applies to Japanese fintech companies such as Kyash.

However, a bill easing this upper limit and other financial regulations was passed on 5 June 2020 and promulgated on 12 June. It comes into force within six months from the date of promulgation. This Act will promote further competition in the industry and give us more options to send money both at home and abroad.

Note:
[2] https://www.revolut.com/en-JP/legal/terms#adding-money-to-my-account
[3] Article 4 of Banking Act.
[4] Article 37 of Payment Services Act and Article 2 of Order for Enforcement of the Payment Services Act.

Doreming

Lastly, I would like to introduce Doreming, a fintech company based in Fukuoka. Doreming is not a company providing an overseas fund transfer service. It provides businesses with an HR platform and enables workers to receive pro-rata payments with their app.

It is not easy for us to imagine, but one-third of the world’s population still doesn’t have access to a bank account. Many of them live in poverty and cannot wait for payday to buy essentials such as food. As a fair financial service (i.e., credit card, bank loan…) is not available without a bank account, they take out payday loans (i.e., small, short-term loans at high rates) from loan sharks, whereby they are getting trapped in poverty spirals.

With Doreming, workers can use their phones (many of them have a phone but not a bank account) to see what funds are available for the amount of work they’ve done before payday. They can then use those funds for shopping, with shops receiving payment from the employer’s bank account. The service is free for workers. So, their business is tackling a social problem on a global scale. It is the first Japanese company to be elected as a member of Fintech 100 in 2016.

In 2017, to let Doreming conduct a demonstration experiment in Fukuoka, the city as the National Strategic Special Zone proposed to the government ease labor law[5], which doesn’t allow wages to be paid in digital currency. According to Nikkei, I haven’t heard any update since then, but the government is likely to ease the regulation at the national level to promote a cashless society.[6]

Note:
[5] Article 24 of the Labour Standards Act.
[6] Nikkei on 8 September 2020.

Disclaimer: While every effort has been made to ensure that the information on this article is accurate at the time of posting, it is not intended to provide legal advice as individual situations will differ. If you do require advice or wish to find out more about the information provided and related topics, please contact the author.

Text by: Atty. Atsushi Miyake of Miyake Law, October 2020.
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Category
Business
Fukuoka Prefecture
Published: Oct 6, 2020 / Last Updated: Oct 6, 2020

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