TOKYO -- Financial technologies could revolutionize how people send money overseas -- or at least scare the old boys' network into making things easier.
Right now, when going through a bank, at least, there are two big uncertainties when sending money overseas -- cost and time.
Earlier this month at a counter of a major Japanese bank in Tokyo, a teller could be heard explaining to a male customer that it is impossible to determine how much he would be paying in overseas remittance fees or even how long it would take his money to get to where he wanted it.
To send money overseas, this particular bank charges depositors a fee of 6,000 yen ($51.03) as well as a so-called "lifting charge" -- 0.05% of the remittance or a minimum 1,500 yen for sending 3 million yen or less.
"Additional fees," a handout goes on to say, "may be charged separately" by the receiving bank.
Basically, some banks in Japan cannot tell their customers how much it will cost to send cash to an overseas bank account because they don't know themselves. The customer, however, can get the information on his or her own -- by making an international call to the other bank and asking how much it would charge to accept money. Replies can be in the thousands of yen.
But usually this call is not made, and total charges remain unknown. This can necessitate a second trip to the customer's bank to pay shortages due to the overseas bank.
Also, money given to a teller in Japan can take a week or so to make its way into the intended overseas bank account. The exact number of days the process will take, however, is not known by tellers in Japan.
The sender could end up having to pay 10,000 yen just to send 10,000 yen to an overseas account. This is ridiculous.
Many migrant workers, who often remit small sums, are frustrated and complain it can take them 12 hours of work to earn enough to pay the fees for a single remittance.
Although Western Union offers a less expensive remittance service, it is not barrier-free. There is room for even lower-cost services to disrupt the remittance industry, and some Japanese financial institutions are banding together to try to do just that.
SBI Sumishin Net Bank and the Bank of Yokohama are urging other regional banks to participate in building a new payment network. They are trying to reduce fees to 10% of what they would be by going through a Japanese bank today.
Fearful of disruption, the big boys are trying to overhaul their cumbersome systems. Mitsubishi UFJ Financial Group has teamed up with U.S.-based Coinbase, the world's leading bitcoin exchange, on an alternative that bypasses the Society for Worldwide Interbank Financial Telecommunication, or SWIFT.
SWIFT has also announced that it is revamping its own antiquated remittance procedures in league with more than 70 major banks. Its new remittance system -- focused on same-day settlements and fee transparency -- could make its debut next year.
Still, there is skepticism toward SWIFT, which some market players see as an old dog that can't learn new tricks. But SWIFT, genuinely threatened by the fintech wave, is also participating in a global blockchain alliance that could allow for cheap, lickety-split remittances.