PayPal’s cross-border remittance unit Xoom is hoping to build a faster payments market in South Korean by enabling direct delivery into bank accounts, a channel that tends to be more expensive than other options.
The international money transfer service can be sent from consumers in the U.S., UK, Canada, and 31 different European markets to South Korea via the Xoom website or its mobile app into Kookmin Bank, Woori Bank, and Shinhan Bank deposit customer accounts. The funds are available for withdrawal or spending within minutes when received between 12:30am and 11:30pm Korean Standard Time on business days.
In July Xoom expanded to 32 markets in Europe, enabling people in these markets to send money to 130 international destinations to tap into the growing immigration trend in those countries. In 2017 total European immigration surpassed 4.4 million people according to Eurostat, with Germany receiving the most migrants at 917,000 followed by the UK at 644,000.
The global market for remittances grew almost 9% last year to reach $689 billion and is expected to grow by almost 4% in 2019 to reach $715 billion according to the World Bank. The news that Xoom’s transfers will be accessible within minutes is good news to recipients in South Korea, however the bank channel is generally the most expensive one in which to receive money.
The World Bank reports banks charged an average 11% fee in the first quarter of 2019 for consumers to receive remittances, making it the most expensive money transfer channel. The second most expensive channel is the national post office which charges over 7% and if there is an exclusive deal with the money transfer operator the post office typically will charge an additional premium ranging between 1.5% and 4%. Globally the average fee to send remittances is 7%.
In South Korea, Xoom offers “competitive rates” for the sender, with fees of $4.99 for transfers lower than $1,000 and no fees for transfers greater than $1,000 when funding with their PayPal balance or a bank account, said Jaymie Sinlao, global communications specialist for PayPal, in an email. “In terms of costs for the recipient, Xoom works closely with its banking partners in each receive country to reduce costs for recipients, and Xoom does not charge recipients to receive money,” Sinlao said.