Fintech Brings Migrant Worker Remittance Business Above Ground

Long forced to send money back home through an inefficient and expensive gray-market system, migrant workers in Taiwan now have access to a growing number of convenient, secure mobile app-based remittance services enabled by recent regulatory changes.

For many years, Taiwan’s financial sector paid little attention to the more than 700,000 migrant workers from Indonesia, Vietnam, the Philippines, and Thailand who currently live and labor on the island. Each of these workers typically remits around US$500 per month to relatives back home, constituting a whopping annual overseas remittance flow of more than US$4 billion.

Without the means to conduct their remittance transactions through local banks, these migrant workers have long had to resort to less secure measures for sending money back home. Many bring their hard-earned cash to places like Indonesian-run grocery stores and Filipino karaoke bars, where brokerage firms then bundle hundreds of remittances together and send them to banks in the migrant workers’ home countries. The agencies usually charge hefty fees for this service, and transactions can take days or even weeks to complete.

The situation appears to be improving, however, as Taiwan’s agile fintech sector has recognized the potential business opportunities and Taiwan’s authorities worry that the overseas remittance flow has become too large to be left in the legal gray zone forever.

In 2019, Taiwan launched a regulatory sandbox for novel fintech applications. This led to the amendment in 2021 of the Act Governing Electronic Payment Institutions and the enactment of Regulations Governing Small Amount Remittance Services for Foreign Workers. Migrant workers can now remit money from Taiwan using electronic payments through mobile apps designed specifically for that purpose.

In addition, the Financial Supervisory Commission (FSC) last October expanded its definition of financial services companies to include foreign-worker remittance businesses, a change that allows migrant workers to seek the help of an ombudsman under the Financial Consumer Protection Act in case of a dispute.

“It was often not easy for migrant workers in Taiwan to access formal banking services due to the high costs of banks’ foreign currency remittance services and limited business hours, as well as hindrances related to travel, work patterns, and language,” a spokesperson for the FSC explains. “The new measures are expected to lead to small-amount remittance services being operated through legitimate, secure, and transparent channels while incentivizing migrant workers to remit money through those channels, which may prevent them from getting scammed or resulting in disputes,”

Service pioneers

As of mid-June, only two companies – Welldone Company and Eastern Union Interactive Corp. (EUI) – have been granted the new permit by the FSC. Welldone, which got its start as a contract manufacturer of batteries for Toshiba, launched its remittance business in October last year, followed by EUI this May. Welldone’s online micropayment platform, Quickpay, generates a barcode that can be scanned at any of Taiwan’s main convenience store chains, after which the funds to be remitted are collected by the clerk. The recipient in the migrant worker’s home country collects the payment from a local bank or, in remote areas, a cash-pick-up counter using another barcode on the same app.

EUI, a local fintech firm, has developed several apps marketed to migrant workers from major labor-exporting countries to Taiwan, including Vietnam (VietMoney), the Philippines (PhilMoney), and Indonesia (IndoMoney). Their apps function similarly to Welldone’s Quickpay.

“Compared to traditional banks and grocery stores, where people have to show up in person during operating hours to initiate transactions, and where the need for instant transfer of small amounts cannot be met, foreign workers can now wire their money overseas instantly by using the apps and completing the transaction at convenience stores or ATMs,” says attorney Jaclyn Tsai, chairperson of the Taiwan FinTech Association and a former Minister Without Porfolio. “It saves them the inconvenience of having to overcome the language barrier to communicate with someone in person and provides the added benefit of allowing foreign workers to send money 24/7.”

Local fintech firm EUI has developed several apps for migrant workers from major labor-exporting countries to Taiwan.

Nevertheless, Tsai notes that statistics published by Taiwan’s Business Today magazine show that remittances made through Welldone and EUI currently account for only around 20% of money remitted by foreign workers from Taiwan to their home countries. “Given that the laws and the license are relatively new, there is still substantial room to grow foreign workers’ awareness of and trust in these new tools,” she says.

More than 10 companies have since inquired with the FSC about the new permits. Among these is Taipei-based FastPay, a spinoff of a migrant worker brokerage firm that for now serves only the Filipino community. FastPay, which currently holds a manpower agency license and a mobile app security license, offers an app similar to those developed by Welldone and EUI.

In addition to cash remittances, FastPay’s app also allows migrant workers to pay into the Filipino pension fund, make church donations, maintain an e-wallet, and pay their relatives’ utility bills. “The latter function is increasingly popular, as many migrant workers worry that their loved ones back home may spend the money in ways that were not agreed upon,” says Kate Valencia, FastPay’s operation manager. “The pandemic served as the underlying booster for our services, as the places where the foreign workers used to congregate were shut down, and many employers didn’t allow their foreign employees to go out.”

FastPay charges between NT$99 and NT$149 per transaction, compared to Taiwanese banks’ typical range of NT$350-500. Domestically, it promotes its service through sponsorship of cultural events, such as the 2022 Fun Run held at the New Taipei Metropolitan Park on Philippine Independence Day in June. The company is also preparing to enter the foreign-worker remittance markets in the U.S., Canada, New Zealand, and Japan.

Joseph Tseng, a corporate lawyer at the Taipei office of K&L Gates, confirms that Taiwan’s legal framework for the remittance business is at this point sound, as the service providers are required to perform KYC (know your customer) procedures – for instance, by requiring customers to present their ID, work permit, and passport in order to complete a transaction. This, he says, greatly reduces the risk of money laundering and fraud compared to the conventional way of sending the money through grocery stores and karaoke bars.

Attorney Jaclyn Tsai says that although apps for international money wiring are more convenient than traditional methods, utilization has been slow to grow.

Additionally, the funds received by the foreign worker remittance companies are secure, as they are either handed over to a trustee or backed by a guarantee from a financial institution. Such funds are prohibited from being commingled with the remittance company’s assets. The FSC is also authorized to, at any time, require companies to submit financial and asset reports and audits or retain an auditor to conduct an inspection of the company’s operations and financial reports. The commission mandates that overseas remittance services are limited to foreign workers only.

“The main concern of Taiwan’s Central Bank is not primarily anti-money laundering, but that the foreign exchange rate could be affected by a disorderly large capital outflow,” Tseng says. “Therefore, foreign worker remittance companies still need to complete cross-border remittances through the banks.”

Tseng predicts that current limits for each foreign worker of NT$30,000 per transaction, NT$50,000 per month, and NT$400,000 per year will prove too low, and that they will thus need to be raised in the medium term.

On the macroeconomic side, Taiwan relies heavily on foreign workers to keep up with the surging global demand for consumer electronics, as well as for caregiving, farming, supporting the island’s fishing fleet, and construction. The workers’ home countries, for their part, rely heavily on their remittances, with the Philippines, for example, earning 9.6% of its GDP through such transactions in 2020, according to the World Bank. 

Nick Marro, the Economist Intelligence Unit’s lead for global trade, notes that up until the advent of COVID-19 in 2019, the number of foreign workers in Taiwan steadily increased annually. He predicts that this trend will reemerge as Taiwan gradually eases its border restrictions on inbound travelers. “The relatively stable economic outlook for the next five years suggests a decent amount of job and income opportunities, particularly for foreign workers from developing Southeast Asia, given that salaries in Taiwan may be higher than what they might get back home,” Marro says. “As a result, we can likely expect the number of remittance transactions to expand in parallel, creating some opportunities for fintech companies who want to get involved in this space, including by facilitating these transfers.”