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Japanese banks will lower the fees on money transfers to South Korea by 90% as early as 2018 in an effort to remain competitive and prevent customers from switching to foreign rivals.
The plan was revealed Wednesday by the Japanese Bankers Association at a panel hosted by Japan’s Financial Services Agency. Currently, each transfer is processed individually between the sending and receiving banks, often with the involvement of intermediary banks. Fees range from about 4,000 yen to 5,000 yen ($35.80 to $44.80) per transaction for companies, and are slightly higher for retail customers.
The dramatically lower fees will be achieved by consolidating all transfers from Japanese banks to a country into one bundle. A single lead bank then will send the entire amount to the destination country once a day, sharply reducing fees paid to intermediary banks.
Japan’s three megabanks — Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group — will be the first to adopt the new framework. Major regional banks are expected to follow suit.
New financial technology has let some American and European banks reduce international money transfer fees to just several dollars. The planned cut will squeeze the income of these Japanese institutions, but the move is seen as necessary to keep up with foreign rivals.
Japanese banks will consider reducing fees on transfers to Thailand, Malaysia and other Southeast Asian nations as well.
