Compared to other Asian countries, the development of the FinTech market in Taiwan is still in its infancy. It was only in 2015 when the Finance Supervisory Commission in Taiwan (FSC) announced the “Creating the Digital Finance Environment 3.0 Project”, which aims to provide fewer restrictions on online banking and applications. In its first wave, all banks were required to offer online financial services by the end of 2015 to simplify the banking processes.E-commerce and telecommunications companies were also encouraged to create new forms for financial services using technology. These baby steps are meant to digitalise various industries’ information and operations, and to slowly ease in the idea of digital disruption or what FinTech offers.
Known for its efforts to promote a vibrant entrepreneurial ecosystem, one of Taiwan’s key focus is to be the connecting platform for the next generation of entrepreneurs, both locally and globally, to kickstart their tech venture journey. Riding on the wave of innovative pursuits, FSC has taken several initiatives for the development of financial technology in Taiwan. This includes the FinTech Innovation Act, which adopts the idea of a regulatory sandbox, aimed at establishing a secure environment for innovations and experiments as well as protecting the consumers. New rules and regulations are also set on allowing establishments of “virtual banks” to further liberalise the regulations of traditional banking.[S&PGlobal]
Taiwan has a mature and ideal market for field-testing new business models. Backed with robust financial and data infrastructure, the nation has a high penetration of internet, credit cards, smartphones, providing a stable ground for FinTech to maximise the development of effectiveness. [EyeonTaiwan] Besides being strategically located geographically in East Asia, the nation has high spending power, making Taiwan highly desirable for foreign companies to enter the market. Yet, despite these advantages, FinTech developments have been a slow thaw in Taiwan due to several challenges.
The financial industry in Taiwan is highly regulated and the authorities are known to adopt an overly prudent approach, often prioritising financial stability over innovation. Even with the introduction of FSC as a growth accelerator for the financial technology landscape, the industry remains skeptical and regards FSC more as a supervisory authority. Rather than the commonly known financial disruptor, the government’s initiatives are interpreted to promote FinTech as a collaborator with traditional financial institutions such as banks. While the collaborative mindset aims to leverage the banks’ expertise to lower startups’ risks, it unknowingly stymies the potential of FinTech, which thrives as a transformative and disruptive innovation.[FRBSF] Coupled with an avowed fact that banks see the new financial market entrant as a significant threat, it further stunt the growth of FinTech as there may be skepticism in imparting invaluable data or knowledge.
Albeit the paradox, a multitude of unexplored business models and warming up of financial institutions bring about limitless opportunities in the Taiwanese FinTech landscape, far outnumbering the challenges. Further debunking the rigidity of regulations, there was a huge breakthrough in August 2019 for the virtual bank entrants when FSC issued three digital banking operating licences, much to the industry’s surprise. Speaking at a marketing expo in 2017, Premier Lai Ching-te revealed a lofty goal to accelerate the scale and usage of contactless payments to 90% by the year 2025 [Executiveyuan]. In that same year, Apple Pay entered the contactless payment market in Taiwan via the E-Payment Act which backs e-payment service providers to conduct e-payment businesses. [MIC] These new initiatives and increasing government fervency connote evolving openness towards FinTech developments in Taiwan.
Besides advances in regulations, the FSC recognises the need to generate new momentum and facilitate ongoing interactions and communications between the financial and technology sectors. Several affiliations have been established to elicit active connections within the FinTech space. Each association has different objectives to achieve in cultivating a vibrant FinTech ecosystem:
In demonstrating commitment to build up a vibrant ecosystem that is able to accommodate and boost various technological innovations for the finance industry, the FSC and the TFSR started FinTech Space which serves as a cohesive FinTech platform. This space aims to stimulate latest innovations, gather old and new FinTech entrants, and attract professional talents worldwide. One of FinTech Space’s milestones would be the FinTech Taipei trade show which attracted 32,303 visitors in 2018. Following the previous year’s success, the president of Taiwan, Tsai Ing-wen will be gracing the opening ceremony for this year’s trade show, affirming the government’s support for FinTech as an enabler. DesFran will be participating in FinTech Taipei 2019 from 29 to 30 November, do visit us at B813.
FinTech in Taiwan: Beyond Infancy
As the consumer behaviour paradigm in Taiwan shifts, there is an increasing demand for service innovation and product transparency. The inevitable trend of digital transformation will require FinTech industry entrants to gain more autonomy and experiment with new ideas to achieve cutting edge innovative products or services. In order to fulfil the new market needs and remain competitive in the global market, the Taiwanese authorities will eventually be pressured to reexamine current propositions and guidelines of FinTech as a collaborator rather than a disruptor.
Meanwhile, obtaining a FinTech approval from the FSC in Taiwan can be a relatively rigorous process due to regulatory constraints. Having a decade of experience in financial licences, DesFran has the expertise to bridge the gap for business expansions. Tap on our expertise and contact us today.
Taiwan: Fintech, InHouseLawyer.co.uk
The Future of Banking: Virtual and Vital–Online-Only Banks Aim to Transform Taiwan Banking, SPGlobal
About the Author
Joey Tan is Strategic Communications and Research Manager at DesFran. Joey has a flair for creatives and is always keen on improving and upgrading herself within the realm of the financial services industry. She manages the strategic communications and marketing initiatives in DesFran and has a keen interest in financial licensing and regulations. Joey is a sociology graduate from the University of Buffalo.