The Japanese FSA has announced it will finally remove a ¥1 million (US$9,000) cap on cross-border money transfers handled by non-banking entities, paving the way for a major overhaul of Japan’s remittance industry.
Until now, industry-disrupting cross-border payments groups like TransferWise, WorldFirst, OFX and Revolut have gained little traction in Japan due to a requirement that all transactions in excess of 1 million yen (roughly 9,000 US dollars) are handled by banks.
This is set to change after Japan’s Financial Services Agency announced this week its plan to grant money transfer licenses covering larger transactions to “suitable” non-banking firms that meet minimum capital requirements. Further announcements are expected but it is estimated that the cap will be removed by mid-2021.
“By creating a new service category, we want to make convenient payment methods a reality,” Japanese Finance Minister Taro Aso has said.
The decision is likely to herald massive interest in fintech money transfer specialists, particularly among small and medium-sized Japanese businesses which have so far been unable to take advantage of the much cheaper transfers these firms provide due to the limitation on transaction size.
Further to providing massive savings on cross-border payments (traditional banks can cost six times as much), many of these non-banking services are easier to use because of simple and well-designed online platforms, and many offer much faster processing times.
As of February 2019, Japan has 64 companies registered to provide money transfer services and this number is expected to grow significantly in the years ahead.