The Financial Supervisory Commission under Chairman Wellington Koo (顧立雄) has recently struck a more flexible policy stance toward the implementation of financial technology, or “fintech,” in Taiwan.
In an Oct. 7 meeting with a fintech trade association, commission officials agreed that rules governing fintech development need to be modified, given the progression of the financial sector and the structure of the nation’s economy.
At the Legislative Yuan’s Finance Committee meetings last week, the commission confirmed that Koo met with representatives from the Taipei City Government and Taiwan Financial Services Roundtable on Tuesday to discuss potential sites for a fintech innovation park in Taipei, with the aim of building an industrial cluster where businesses could test fintech concepts.
Lawmakers are working on a preliminary review of a draft bill for a “regulatory sandbox,” which would allow businesses to experiment with fintech innovations in a loosely regulated environment.
Whether a new law is drafted or existing regulations are amended to allow for fintech development, the matter entails a time-consuming — if not extremely bureaucratic — process.
Developing an industrial cluster for this emerging industry will also require money from all parties involved, but the commission’s efforts to promote fintech development in Taiwan are necessary, as the financial sector must keep pace with the fast-changing global market and retain its professionals. The move might also encourage non-financial enterprises to develop innovative products that respond to consumer demand for better services.
There is no question that fintech has become a hot topic, but a report released by the Taipei-based China Credit Information Service last week showed that Taiwan’s financial holding companies appear to be much less committed than their regional peers to this new wave of innovation.
The report said that the financial holding firms spent a combined NT$1.25 billion (US$41.3 million at the current exchange rate) on fintech development last year, or 0.37 percent of the US$11.2 billion spent by their peers in Asia.
Taiwan has a long way to go to catch up with its regional neighbors in fintech investment. Practical concerns over earnings and sales increases, as well as difficulties in transforming fintech ideas into marketable applications, have hindered local institutions from making larger investments in fintech.
Conventional financial services are facing comprehensive changes due to technological advances in mobile communication, big data, cloud computing and artificial intelligence. Rapid advances in digital technology are creating opportunities and challenges for consumers, service providers and regulators unlike anything seen in the past 100 years.
Many question whether, apart from better and innovative services, fintech can address consumer concerns about trust, security and privacy. If financial institutions cannot earn customer trust, how can they expect customers to visit their brick-and-mortar outlets — let alone their digital platforms?
Although there are no quick fixes for this concern, as Taiwan’s fintech development is in its early stages, one certainty is that fintech legislation must be nimble, timely and accommodative.
Meanwhile, the commission must carefully balance the trade-off between efficiency and stability in the face of the rapid changes in the financial sector.
Most importantly, while paying attention to possible disruptions and risks in the financial landscape, the commission must diligently protect consumers in this era of digitization in financial services and ensure that fintech services providers can comprehensively address the issues of security and privacy.
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