With high penetration of internet, cellphone, and credit card, and a well-established infrastructure, Taiwan is a mature and ideal market for field-testing the new business model.
Its strategic geographical location in East Asia and high spending power also make Taiwan a desirable first stop for global companies and regional startups to enter before boldly marching to other neighbouring countries such as China, Korea, and Japan.
This is, however, not the case for fintech. Despite the aforementioned advantages, Taiwan is encountering great difficulties in developing a sound and holistic environment that fully supports fintech innovation.
In this article, Tagtoo team will lead you to an insider’s look at the status quo of fintech in Taiwan and dissect the possible causes that have prevented Taiwan’s fintech from moving forward.
Government authorities remain hesitant
The Taiwanese government has been criticised for being overly conservative in terms of financial regulation and prioritising financial stability over financial innovation. Any newly-launched financial services without authorities’ approval are considered illegal, which greatly suppress the growth momentum of fintech teams.
Instead of playing the role of ecosystem promoters that encourage the development of fintech, government authorities tend to act as industry regulators to oversee if startup teams break laws.
For example, while a regulatory sandbox allowing startups to test innovative financial products or services without violating the existing regulation has been initiated, the entire environment remains unfavourable for fintech teams because of the lack of proactivity in providing tax incentives and other substantial perks from the government.
Moreover, government authorities prefer fintech startups to work together with financial institutions to lower down the potential risk of poor management and operation.
This move may potentially lead to collision between two parties due to the different working culture, eventually preventing real financial disruptors, as financial institution would hold more power in decision-making with the strong backup of capitals.
What the Taiwanese government should look at right now is how to leverage the financial regulation and the abundant resources that Taiwan possesses to build up a vibrant ecosystem that is able to accommodate and boost different ideas of FinTech to flourish.
Major banks remain extremely cautious
Despite the fact that fintech will bring customers unprecedented convenience by significantly simplifying the traditional process of financial service, most Taiwanese banks, in fact, consider fintech as a hot potato to handle and are unwilling to make changes.
Even though some banks argue that they have utilised “fintech” in their existing financial service, the truth is they are not embracing the real power of fintech to provide better and customised banking service, but only digitalising their service through mobile apps and websites.
Most banks remain extremely cautious in launching fintech-powered, brand-new financial products; they also hesitate in taking a leading role. This is why the public find traditional banks disappointing and hold a pessimistic attitude toward the future fintech development in Taiwan.
“Banks should see fintech startups as close patners rather than competitors,” says Tagtoo CEO Teddy Yang. “Only when both parties cooperate well can Taiwan’s fintech gather enough momentum to compete with global companies.”
While Taiwanese banks are concerned about the huge impact coming from fintech, little do they know the potential benefit deriving from the tremendous opportunity. While fintech might cut down the existing revenue stream, such as payment income fees, it will undoubtedly create another more profitable services and products.
Taiwan’s fintech development is lagging behind other countries such as Singapore for several years. The highly regulated and protected environment is an obvious obstacle to overcome. More importantly, the conventional mentality of current stakeholders, banks and government authorities, should take the major responsibility of the fact that Taiwan has collapsed from the leading position in fintech.
The existing financial service system has matured
Compared to around 4,800 locations of financial institutions across the US to serve 330 million population, there are more than 5,000 financial institutions in Taiwan for its total population of 24 million. The coverage of financial service is obviously much higher in Taiwan.
In fact, Taiwan’s financial service system is already complete and mature. In addition to the huge number of physical banks, most Taiwanese banks have developed online or mobile banking that allows customers to deal with nearly all the banking service, such as balance check, money transfer, etcetera.
Credit cards application process in Taiwan is fast with a waiting time of fewer than seven days. Taking out an insurance policy is also easy as many insurance brokers have been designated to service specific locations and are available to meet up. It seems like there is no strong incentive for customers to demand for fintech acceleration, especially when compared to other countries.
Coupled with the prior approval of mobile payments, the current advancement of financial services have already satisfied most customers and is considered quite enough for daily activities.
Consequently, the general public’s impetus for other areas in fintech, such as P2P lending and robo-advisor, is not widely discussed and concerned, except among industry insider. The momentum of developing fintech disruptors somehow has slowed down.