UPDATE: Just to be clear, this article is about an expansion of Paypal’s services in Japan into bank remittances. Paypal already offers some services in Japan linked to credit cards. Thanks to commenter Adrian for pointing that out.
The Nikkei has an article noting that thanks to law revisions set to pass in the current Diet session, restrictions on the remittance business will be substantially relaxed in a move that will finally allow Paypal to offer its services in Japan. The article contains an example of how sending money will change starting some time in 2010:
Current money transfer services offered by banks are not ideal for sending small amounts of money overseas. For example, a major Japanese bank charges 5,500 yen for wiring money to a U.S. bank account regardless of the amount.
PayPal and other online money-transfer services offer a cheaper, more convenient alternative to traditional bank wires. High fees have stopped a grandmother in Nagoya from sending a 5,000 yen birthday gift to a grandchild in the U.S., since she would have to spend more on fees than the amount she is sending.
If an online money transfer service such as PayPal can be used, the grandmother probably would have sent the money without hesitation because fees for sending 5,000 yen to the U.S. using that service come to no more than 200 yen.
This sounds tempting, but the numbers presented are misleading, especially in this English-language summary of the original Japanese article.
According to the print edition of Nikkei, Paypal will charge fees of 1.9-2.7% of the amount, plus an additional 30 yen fee, in contrast to banks which take a flat fee (usually around 4,000 yen, but Lloyds charges just 2,000) plus a foreign exchange fee of around 1%. So while the service looks cheap for small amounts like the example above, in reality the fees are cheaper than banks only up to around 150,000 yen, according to a company spokesperson quoted in the article (vs. Lloyds that number falls to 100,000 yen). For debt slaves like me who routinely send 200,000 yen overseas each month, this would make no difference at all.
And of course Paypal’s service has other benefits besides overseas remittances – it’s mainly a convenient way to pay for online auction purchases (without giving out credit card info), so maybe it will catch on here as well. Other benefits touted by the article included 24-hour service and “lower fees” though they did not present examples as to how the fees for domestic transfers would be cheaper.
Plus other businesses such as NTT Docomo are planning their own services, so maybe at some point someone will find a profitable way to make overseas remittance cheaper.