While these steps would boost the convenience of money transfer services, every precaution must be taken to protect users and prevent these services from being exploited for improper purposes.
The Financial Services Agency is considering allowing nonbank companies to handle single money transfers of more than 1 million yen.
The agency will wrap up the general framework of this reform as soon as this summer. It apparently plans to submit bills to revise the Payment Services Law and other laws during next year's ordinary Diet session.
If companies offering fast, relatively cheap transfer services for large sums of money entered the market, the range of applications for these services would widen, including being used for settlements for expensive items. This also could be expected to stimulate competition for business-to-business transfers of large amounts of money, a sector in which banks hold a monopoly.
Aside from banks, companies that remit money are businesses authorized to conduct such operations under a registration system that started in 2010.
At least 60 companies are currently registered to provide money transfer services. Growing use of smartphones and other devices to conduct financial transactions has spurred an increase in the total value of money transfers handled by such companies. In fiscal 2017, this figure topped 1 trillion yen.
However, the amount of money these companies can remit in a single transfer is restricted to 1 million yen or less. Many observers have pointed out this restriction is hindering the financial technology (fintech) revolution, the fusion of financial services and information technology.
The agency is poised to allow uncapped remittances for nonbank companies that will be classified into a new business category to be established under an authorization system that would have stricter conditions than the registration system.
Onus on banks to step up
At least half of all remittances made through money transfer companies are for less than 5,000 yen. As things stand, it can be said that the prevailing use of these services is by individuals sending small sums of money.
Reviewing the current system should also make it easier for these companies to meet the needs of corporate clients by enabling them to quickly and cheaply remit large amounts of money.
In particular, there has been deep-rooted dissatisfaction among businesses and other customers that international remittances made through banks take too long.
If new businesses that offer swift money transfers as their main attraction join the market, banks will be forced to improve their services.
Many analysts also believe banks will come under pressure to cut their international remittance fees, which are widely felt to be too high.
While boosting the convenience of these services should be welcomed, it is crucial that money transfers be conducted safely and reliably.
Introduction of the new system must be accompanied by strengthened measures to protect its users. The system must help safeguard user assets, such as by imposing capital adequacy requirements on new business operators.
It is impossible to swat away concerns that an increase in the number of operators handling large international money transfers could heighten the risk these services could be exploited for shady purposes such as money laundering.
Japan's three megabanks are broadening and strengthening their efforts to counter these practices, such as by planning to halt over-the-counter international remittances of cash. How operators newly allowed to send large sums of money will be able to implement effective steps against money laundering is an issue that needs to be addressed.
(From The Yomiuri Shimbun, March 7, 2019)
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