The recent discussions about whether to allow Apple Pay to operate in Taiwan have again drawn attention to mobile payment services. One year after the Legislative Yuan passed amendments to the Electronics Payment Processing Institutions Act (電子支付機構管理條例) — which offers a legal framework for third-party payment services — several online shopping portals and credit-card issuing banks have entered the market, while some mobile payment apps have become popular with consumers.
The Cabinet last week approved a proposal for the use of mobile payment services, like Apple Pay, with certain conditions — such as that mobile payment services should not be processed only by international payment networks such as Visa Inc and MasterCard Inc, and that a qualified token service provider (TSP) should be open for both domestic and foreign entities to help process payments.
The clearing and settlement of transactions with credit or debit cards issued domestically also have to be done in Taiwan.
The government is welcoming not only Apple Pay, but also Google Pay, Samsung Pay, Android Pay and similar mobile payment services. At the same time, the government is hoping these mobile payment providers will not just partner with Visa or MasterCard, but work with local non-credit-card firms, such as debit card, EasyCard and other third-party payment service platforms.
A token represents a unique digital identifier that allows payments to be processed without exposing actual account details that could be compromised. The government’s attitude is that mobile payment providers and international payment processing companies should help with the development of local TSPs, system interfaces and verification.
The central bank had earlier said it was concerned about Apple Pay’s service quality and security, as its TSP is operated by entities like Visa or MasterCard outside Taiwan.
Clearly, the government’s conditional approval for mobile payment services is aimed at protecting local players, since some domestic mobile payment companies said that granting approval to foreign platforms would hamper their development. However, in view of the increasing prevalence of online-to-offline transactions and rising mobile shopping, the government’s welcome to Apple Pay is more evidence of the nation’s changing mindset toward the so-called “Bank 3.0” era, following a slew of relaxed policies regarding online banking, third-party payment and other financial-technology-related services in recent years.
Taiwan’s payment ecosystem is unfriendly and lags far behind that of China — led by Alipay — and the US, home to PayPal. That partially helps explain why the nation’s online retail penetration reached 6.2 percent last year, far lower than South Korea’s 14.7 percent, China’s 11.4 percent and the US’ 7.3 percent, according to statistics from the Ministry of Economic Affairs and market researcher Euromonitor International.
Mobile payment services would help increase non-cash payment penetration, and the introduction of Apple Pay is likely to lead the trend to reshape the payment ecosystem in Taiwan and change the payment behavior of consumers.
In the long term, a more market-oriented, user-friendly digital payment policy — either mobile payment or third-party payment — should benefit the development of Taiwan’s Internet environment and e-commerce.
However, whether Apple Pay or other mobile payment services can finally launch in this nation depends on their ability to localize their services with a concrete infrastructure. Issues of data security and storage, as well as tax evasion and the “black” economy, are also key to final regulatory approval. As the nation heads into the Bank 3.0 era, the government’s priority, quite rightly, is to protect consumers while making sure businesses can operate.
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