The Financial Supervisory Commission on Friday announced that by the end of this month, it would start accepting applications from Apple Pay, Samsung Pay, Android Pay and other international mobile payment services to operate in Taiwan. However, it remains unclear how the commission will regulate the new services in terms of payment processors, token service providers and the clearing and settlement of transactions.
While several local financial institutions, third-party payment service providers and other companies already offer contactless services, allowing consumers to tap their phones on stores’ payment terminals to complete purchases, and had transactions totaling NT$1.51 billion (US$47.86 million) as of the end of July, the commission’s latest announcement means that Taiwanese might be able to avail themselves of international mobile payment platforms such as Apple Pay by the end of this year at the earliest.
Mobile payment services have become a crucial driver of global growth in non-cash payments, which also include credit cards, debit cards and checks. The introduction of international mobile payment platforms is likely to reshape this segment’s local ecosystem and further change the payment behavior of Taiwanese consumers. It is hoped that, in the long term, a higher penetration of mobile payment usage and a more user-friendly digital payment platform could benefit the nation’s e-commerce progress.
Meanwhile, the commission is for the first time to introduce a “regulatory sandbox” to give businesses room to experiment with new financial technology (fintech). The announcement, also made on Friday, is meant to provide interested businesses — either financial institutions or technology firms — a special environment to interact with regulators and existing laws, as well as explore suitable regulations if necessary, under the premise that potential risks are mitigated and the interests of all parties involved are protected.
Although the commission has named its new initiative a “pilot program” rather than a “sandbox,” the term its Singaporean and UK peers have adopted, the core of the concept is the same: to create a specially designed mechanism for testing new products and services.
The question is how fintech innovation can be achieved if the commission’s “pilot program” is still constrained by current regulations. Is it possible that under the present legal system the commission is able to provide businesses a certain degree of legal relief while testing new products? If not, does it mean that there is a need to draft a provisional act to regulate the new mechanism, which otherwise suggests the need for greater cooperation and coordination between a determined government and an effective legislature?
Another issue is whether the sandbox concept would apply to every fintech enterprise, which involves a wide range of services including payment, investment, financing, insurance, big data analysis and information security. Even in a sandbox, businesses still need to conduct themselves according to the principles of transparency, fairness, competition and reasonableness, therefore the commission must seek feedback from experts and inform businesses about which technologies are suitable for the application of the sandbox mechanism and which are not.
After all, the government’s pushing for fintech development is welcome and its priority, quite rightly, is to protect the rights and interests of all parties involved while making sure that financial innovation can thrive.
However, it is also important that people have a proper understanding of the sandbox mechanism and a certain level of tolerance for the possible failure of financial innovation, because there are always uncertainties when new technologies are adopted.
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