Three companies have recently acquired virtual banking licenses from the government of Taiwan. This the first time that the government does this, as Taiwan is starting to follow other regulators in Asia which are on the move to regulate their markets properly.
The licenses have been awarded to Rakuten International Commercial Bank, LINE Financial Taiwan (a subsidiary of the LINE Group in the country) and the local operator Chunghwa Telecom. These are important groups, which include two Japanese companies (Rakuten and LINE) and one Taiwanese firm.
According to the reports, no more licenses will be issued to more companies so soon, so these three will be the only one with permission to act like virtual banks in Taiwan for some time. Initially, only two licenses were to be given, but each company had a pretty different business model, so the regulators decided to award each one of them with the license they wanted.
Fergus Gordon, the leader of Accenture’s Banking practice in Asia, affirmed that these new actors which are appearing in Taiwan are likely to be focused on specific markets such as microloans and SMEs. They want to be more efficient than traditional banks in these areas, which are not as popular with them, so they can carve their place in the market.
This event follows a trend that is happening in Asia right now. Several fintech companies are starting to challenge the local banks by offering innovative digital banking solution. This is increasing the competition in the area and starting to create a revolution in Asia.
Hong Kong gave out a total of eight virtual banking licenses to companies such as the Alibaba Group Holding and Standard Chartered while Singapore decided to give away five licenses.
Regulators from countries such as South Korea, Malaysia and Thailand are also considering to do the same, which shows just how the market has been evolving lately.
Digital banks are growing a lot in the region and the consultancy firm McKinsey affirms that if these banks continue to dominate the market, traditional banks may have a problem as their profitability will get considerably more low by 2023.