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ST Explains: How should you remit money to China?

SINGAPORE – People using a remittance company to send money to China will have fewer options once a set of new rules kicks in on Jan 1.

The measures will last until March 31 and bar remittance companies from using non-bank and non-card channels such as third-party agents, which charge lower transfer fees.

Firms instead will only be able to engage a bank, a card network operator like UnionPay International or a licensed financial institution that can in turn use a bank or card network operator to assist such transfers.

The Monetary Authority of Singapore (MAS) imposed the suspension after the police here received reports that more than 670 remittances through non-bank and non-card channels had been frozen in China as at Dec 15, involving a total of around $13 million.

The Chinese authorities took the action after remittance companies, such as those in Chinatown here, processed the transfers through overseas licensed agents instead of using a direct bank transfer from Singapore to China. It is not clear why China took the action it did.

The Straits Times looks at various ways to remit money to China, as well as the costs and risks.

Q: What options are available for people to send money to China?

A: There are various ways for individuals to send money online besides using remittance firms. One is to use the apps of local banks, although this tends to be more expensive due to less favourable exchange rates.

There are generally two factors involved in cross-border transfers: the transaction fee and the exchange rate. Payment providers often offer relatively low or zero upfront transaction fees, but mark up the exchange rate instead. 

With traditional banking methods, transfers below a certain amount may not be economical due to additional bank fees, said Mr Raymond Ng, chief executive of Revolut Singapore.

The firm allows customers here to send money to recipients in China via bank transfers, although other options like card and mobile wallet transfers are in the pipeline.

“In addition, bank transfers can take between three and five days, especially in underdeveloped markets, due to multiple intermediaries,” he added.

Mr Ryan Gwee, founder and group chairman of global payments company Aleta Planet, said the fees charged by banks are up to 50 per cent higher than those imposed by third-party agents.

Other options include sending money via fintech firms like Wise and Panda Remit or China-based apps Alipay and WeChat Pay.

Wise, for example, allows individuals to send Chinese yuan to UnionPay, Alipay and Weixin users. Meanwhile, Panda Remit accepts PayNow, bank and ATM transfers in Singapore dollars and deposits yuan into AliPay, WeChat and bank accounts in China.

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Aleta Planet has a digital debit card that allows users to pay for their expenses in China like a local by using the UnionPay network.

In the next few weeks, Aleta Planet plans to relaunch the card to incorporate a free remittance feature, which users can access via its app to send funds to a UnionPay bank account in China, said Mr Gwee.

Customers can compare rates on various platforms with the mid-market rate found on Google to see if they are getting a good deal. The mid-market rate refers to the mid-point between the buy and sell prices of two currencies.

It is also useful to note the final amount the recipient will receive, after factoring in the exchange rate and other fees.

Q: What are the benefits of using banks and cards to remit money to China?

A: Some fintech providers that allow customers to send money via bank and card transfers offer rates that are often close to the mid-market one.

More importantly, using bank and card channels reduces the risk of funds or beneficiaries’ accounts being frozen by the Chinese authorities.

Some customers might prefer using third-party agents via remittance companies as they seek lower costs and are unfamiliar with online platforms.

The Chinese Embassy advised its citizens here on Oct 24 to use official banking channels to remit funds to China even though non-banking channels might offer more favourable exchange rates.

Each mainland China recipient is allowed to receive a maximum of US$50,000 (S$66,500) a year under China’s capital controls.

China has recently stepped up efforts to crack down on money launderers, and many of the remittances that go through non-bank agents have been suspended pending government investigations, noted Mr Gwee.

The MAS said on Dec 18 that the suspension of non-bank and non-card channels by remittance companies for money transfers to China is necessary to protect consumers and stem the number of reported new cases of beneficiaries’ accounts in China being frozen.

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Q: What’s next for remittance companies?

A: The MAS will review whether to terminate or extend the suspension or take other action, said a spokesman.

It added that it does not prescribe the method through which funds are remitted, adding: “However, remittance companies are expected to conduct robust due diligence on the correspondent financial institutions that they work with, and ensure compliance with the relevant laws and regulations.”

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