Long forced to send money 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 money transfer 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 work on the island. Each of these workers typically pays around US$500 per month to relatives back home, amounting to a huge annual overseas remittance of more than US$4 billion.
Without the means to carry out their transfer transactions through local banks, these migrant workers have long had to resort to less secure measures to send money home. Many take their hard-earned cash to places like Indonesian-run grocery stores and Filipino karaoke bars, where brokerage firms then collect hundreds of remittances and send them to banks in the migrant workers’ home countries. The agencies usually charge large fees for this service, and transactions can take days or weeks to complete.
However, the situation appears to be improving, as Taiwan’s nimble fintech sector has recognized the potential business opportunities and Taiwan’s authorities worry that overseas money transfers have become too large to remain in the legal gray area forever.
In 2019, Taiwan launched a regulatory sandbox for new fintech applications. This led to an amendment in 2021 to the Act on Electronic Payment Companies and the adoption of regulations on small amount transfer services for foreign workers. Migrant workers can now transfer money from Taiwan using electronic payments through mobile apps designed specifically for this purpose.
In addition, last October the Financial Supervisory Commission (FSC) expanded its definition of financial services companies to include foreign workers, a change that allows migrant workers to seek help from an ombudsman under the Consumer Financial Protection Act in the event of a dispute.
“It was often not easy for migrant workers in Taiwan to access formal banking services due to the high cost of banks’ currency transfer services and limited working hours, as well as barriers related to travel, work patterns and language,” an FSC spokesperson explains. “The new measures are expected to result in money transfer services for small amounts being operated through legitimate, secure and transparent channels, while incentivizing migrant workers to transfer money through these channels, which may prevent them from being defrauded or resulting in disputes,”
Service pioneers
As of mid-June, only two companies – Welldone Company and Eastern Union Interactive Corp. (EUI) – received the new permit by FSC. Welldone, which started out as a contract manufacturer of batteries for Toshiba, launched its remittance business in October last year, followed by EUI in May. Welldone’s online micropayment platform, Quickpay, generates a barcode that can be scanned at any of Taiwan’s major convenience store chains, after which the funds to be transferred 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 counter using a different 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 work similarly to Welldone’s Quickpay.
“Compared to traditional banks and convenience stores, where people have to show up in person during business hours to initiate transactions, and where the need for instant transfer of small amounts cannot be met, foreign workers can now transfer their money overseas instantly using apps and complete the transaction at convenience stores or ATMs,” says lawyer Jaclyn Tsai, chairwoman of the Taiwan FinTech Association and a former minister without portfolio. “It saves them the trouble of having to overcome the language barrier to communicate with someone in person and gives the added benefit of allowing foreign workers to send money 24/7.”
Still, Tsai notes that statistics published by Taiwan’s Business Today magazine show that remittances made through Welldone and EUI currently account for only about 20% of the money transferred by foreign workers from Taiwan to their home countries. “Given that the laws and the license are relatively new, there is still considerable room to increase foreign workers’ awareness of and confidence in these new tools,” she says.
More than 10 companies have since applied to the FSC for the new permits. Among these is Taipei-based FastPay, a spinoff of a migrant worker brokerage firm that currently only serves the Filipino community. FastPay, which currently holds an employment agency license and a mobile app security license, offers an app similar to those developed by Welldone and EUI.
In addition to money transfers, FastPay’s app also allows migrant workers to pay into the Philippine Pension Fund, make church donations, maintain an e-wallet and pay their relatives’ utility bills. “The latter feature is becoming increasingly popular, as many migrant workers worry that their loved ones back home may use the money in ways that were not agreed upon,” says Kate Valencia, FastPay’s Chief Operating Officer. “The pandemic acted as the underlying booster for our services, as the places where the foreign workers used to gather were closed and many employers did not allow foreign workers 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 in New Taipei Metropolitan Park on Philippine Independence Day in June. The company is also preparing to enter the foreign worker transfer markets in the US, 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 currently sound, as service providers are required to carry out KYC (know your customer) procedures – such as requiring customers to present ID, work permit and passport to complete a transaction. This, he says, significantly reduces the risk of money laundering and fraud compared to the conventional way of sending the money through grocery stores and karaoke bars.
In addition, the funds received by the foreign worker transfer companies are safe, as they are either handed over to a trustee or backed by a guarantee from a financial institution. Such funds are prohibited from being mixed with the remittance company’s assets. The FSC is also authorized at any time to 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 foreign money transfer services be limited to foreign workers only.
“The main concern of Taiwan’s central bank is not primarily anti-money laundering, but that the exchange rate may be affected by an unruly large capital outflow,” says Tseng. “Therefore, companies that transfer foreign workers must still carry out cross-border transfers through the banks.”
Tseng predicts that the 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 to be too low and thus need to be raised in the medium term.
On the macroeconomic side, Taiwan relies heavily on foreign workers to keep up with the growing global demand for consumer electronics, as well as for care, farming, support for the island’s fishing fleet and construction. Workers’ home countries, in turn, 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 head of global trade, notes that until covid-19 in 2019, the number of foreign workers in Taiwan increased steadily annually. He predicts this trend will re-emerge as Taiwan gradually eases its border restrictions for inbound travelers. “The relatively stable economic outlook for the next five years suggests a decent amount of job and income opportunities, especially for foreign workers from developing Southeast Asia, given that wages in Taiwan may be higher than what they can earn back home,” says Marro. “As a result, we can probably expect the number of transfer transactions to expand in parallel, creating some opportunities for fintech companies looking to get involved in this space, including by facilitating these transfers.”
