Fintech in Taiwan: steady as she goes

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In Asia's red-hot fintech scene, Taiwan flies largely under the radar. That's largely because no unicorns have yet emerged among its fintech startups, or any other startups for that matter. Taiwan did introduce a fintech regulatory sandbox in late 2017 and more recently established regulations for security token offerings (STOs), but the policies have yet to activate the fintech market. Fintech investment in Taiwan remains limited, especially compared to regional hubs like Singapore and Hong Kong.

At Taipei's Fintech Expo last December, Financial Supervisory Commission (FSC) chairman Wellington Koo said that Taiwan had strong fintech potential, highlighting the island's tech prowess, both in terms of engineering talent and telecoms infrastructure, as well as its highly developed financial sector.

Now would be a good time for the FSC to consider developing new pro-fintech policies. Measures that would encourage cash-flush local banks to boost their cooperation with fintech startups would be a good start. Taiwan has a huge amount of idle capital in its financial system.

While Taiwan has seen a large influx of investment this year - roughly NT$170 billion - most of the money has been repatriated by Taiwanese manufacturers overseas. In many cases, they're keen to evade the tariffs Washington has imposed on Beijing. The money will be invested in the local manufacturing sector, not finance.

Meanwhile, a handful of fintech startups in Taiwan are growing steadily. In September, the Taiwan Financial Services Roundtable, an industry group, announced that five startups in the local incubator FinTechSpace had raised more than US$1 million each over the past year and had set up with partnerships with incumbents.

Payment installment company Insto's mobile app lets retailers process transactions without a point-of-sale terminal. The app creates a QR code or provides a link to consumers, who pay by either scanning the code or providing their credit card information online after clicking the link. The app also can be used for installment payments.

Insto's growth has been slow and steady. Over the past two years, it has attracted about 30,000 users while transactions have reached NT$10 million.

How-Investech, a blockchain-based fund trader which has raised more than NT$50 million, is working together with Far Eastern International Bank to provide fund management services on the blockchain. The services will allow customers who have purchased Far Eastern's fund products to exchange their products with other customers, without paying redemption fees. How-Investech plans to launch its product in November, pending approval from the FSC.

The key to developing Taiwan's fintech industry will almost certainly be the establishment of more partnerships like Insto and Far Eastern's, which focus on cooperation between incumbents and fintechs, rather than direct competition. Indeed, while the FSC issued three virtual banking licenses in July, all of the consortiums that received approval from the regulator included both tech companies and traditional financial firms. The word "disruption" is not in the FSC's vocabulary.

Fintech executives even tell the local media that they aren't trying to unseat incumbents. “We do not compete with credit card issuers or banks, but we provide a service that benefits all, as we make credit card transactions more convenient for consumers and retailers,” Bruce Chen, chief executive officer of Insto, told The Taipei Times in September.