It is called “chroma-keying” and this feature become available now recently in the last version (4.8)
See release notes: Unreal Engine 4.8 Release Notes | Unreal Engine Documentation
(Search for “chroma-keyed” there)
You have to select your texture asset and activate “Chroma Key Texture” first then select your set your background color.
If you want to avoid this then use alpha transparency creating your textures as *.PNG with GIMP or Photoshop instead of MS-paint.
