The Financial Supervisory Commission has been aggressively promoting the so-called “Bank 3.0” scheme by deregulating online banking, mobile payment and third-party payment businesses, in the hope of helping the financial sector to retain professionals and develop innovative products. While the relaxation is aimed at enabling the financial sector to cope with a fast-changing global trend, it poses both opportunities and challenges.
Early this year, the commission approved 12 financial services to be available on digital platforms, which has extended online banking functions from account transfers and mutual fund sales to online applications for standardized, low-risk retail banking products, personal and home loan processing, wealth management and cross-selling.
So far, the implementation of mobile payment services is still in its early stages in Taiwan, with a focus on remote payment for online shopping: The mechanism of proximity payment has only been introduced by a small number of banks and telecoms. However, the global trend suggests the practice of proximity payment — which aims to replace cash payments — is to become more commonplace with the growing adoption of new technologies.
As for third-party payment services, the legislature approved amendments to the Electronic Payment Processing Institutions Act (電子支付機構管理條例) early this year, which offered a legal framework for third-party payment business to begin on May 1.
With the increasing prevalence of cross-border business-to-consumer e-commerce transactions, there have been more banks moving to form strategic alliances with Internet portals and electronic stored value card players to build up third-party payment platforms to jointly manage cash flows between online and offline, while exploring cross-selling opportunities together.
Clearly, the conventional notion of banking is facing comprehensive changes due to technological advances in mobile communication, big data and cloud computing. While it is not possible to say that traditional branch-based banks are to disappear with the arrival of new technologies, the potential transition to online platforms and mobile channels means that banks in the new era of Bank 3.0 face more challenges than they have experienced over the past 100 years.
Despite limited examples of success for banks that exist purely online, service providers continue to focus on digitization and the development of new financial products through the availability of new technologies. However, one question some people have about schemes such as Bank 3.0 is: Are they being created to replace traditional banking or help complement the existing industry?
There is no quick answer to this question, but one certainty is that Taiwan has a long way to go on the road to extensive digitization of financial services.
The key factor for banks is to offer greater convenience and flexible services to build up trust among customers, or people are unlikely to open accounts with them — let alone the digital platforms for financial services.
For the commission, while paying attention to possible disruptions and risks in the financial landscape as the nation heads into the Bank 3.0 era, it must maintain a viable set of regulations and a legal framework to protect consumers and make sure businesses can operate, if it wants to make headway in the digitization of financial services.
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