Big Japan banks to cut online transfer fees in October

TOKYO — Japan’s three megabanks will lower internet banking fees as soon as in October, as competition with fintech startups heats up, Nikkei has learned.

The country’s major banks plan to cut their internet banking fees to encourage individuals and businesses to transfer money online. In fiscal 2022, the banks also plan to introduce a system that will allow users to send money at a discount via a smartphone app.

Banks are facing a torrent of criticism over high fees, while fintech upstarts offering cheaper services are gaining market share.

Aside from the three megabanks — MUFG Bank, Sumitomo Mitsui Banking Corp., and Mizuho Bank — Resona Bank will also offer lower internet banking fees starting in October, at the earliest. Regional banks such as Bank of Yokohama are considering similar moves.

Now, when an individual transfers less than 30,000 yen ($271) in cash to another bank account through internet banking, a service charge of about 200 yen applies. The fee rises to between 300 and 400 yen for transfers over 30,000 yen. Several banks are considering lowering the fee by 50 yen for transfers of less than 30,000 yen and around 100 yen for transfers of 30,000 yen or more.

Last year, approximately 1.56 billion bank transfers took place in Japan worth over 2,700 trillion yen in total. Both figures have increased by about 20% over the past decade, as more companies transfer money directly to their business partners’ accounts, and individuals more frequently use internet banking to pay rent and other monthly expenses.

The sudden industry moves follow the first cuts in interbank transfer fees in 40 years for transactions conducted through the Zengin System (Data Telecommunications System of All Banks). With the reduction in bank-to-bank transfer fees, major banks have decided to lower their own service charges to customers.

On Wednesday, Fukuoka Financial Group announced that it would review its transfer fees for the first time, following that reduction.

Banks are also reviewing their strategies in a bid to lower the high costs of maintaining ATMs, which require constant monitoring to prevent fraudulent transactions and money laundering. As internet banking has lower operating costs, banks are hoping to direct their users online to carry out simple transactions, like money transfers.

In addition, the three megabanks, as well as Resona and Saitama Resona Bank, are joining efforts to develop capabilities for the transfer of small amounts through a service they have named “Kotora,” with the aim of launching in fiscal 2022. This service will allow users to transfer small amounts, like when splitting a restaurant bill.

Traditional banks are rushing to review their business strategies and services as fintech startups become a major threat.

Cashless services like PayPay, a mobile payment app affiliated with SoftBank Group, have expanded their reach in Japan. PayPay claims to have 40 million users, on a par with MUFG Bank’s personal accounts. PayPay allows users to transfer money to each other for free but charges some to withdraw money.

Cashless businesses have been able to attract users while spending less capital to build infrastructure because they are able to use existing transfer systems that were built by banks and other financial institutions.

Meanwhile, in the West it has become commonplace for users to transfer money at no cost. In the U.S., mobile payment services like Venmo, as well as Zelle, which allow users to transfer money between each other, have gained popularity.

In Japan, money transfers were mainly carried out from one bank account to another, but now smartphones have become a more convenient way for individuals to transfer money.

As banks face tougher competition, the pressure to lower fees have grown. Since online financial services can be operated at a lower cost, banks may also start reviewing their fees for services other than money transfers.

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