TAIPEI/HONG KONG (July 30): Taiwan issued its first virtual banking licences to three consortiums led by Taiwan and Japanese investors, its financial authorities said on Tuesday, following moves by regulators in other Asian markets to issue such licences.
Asia's internet firms are challenging the region's traditional banks for consumer finances, hoping to increase competition and drive innovation in their markets, while non-banking companies are keen to challenge traditional banks by leveraging their technology and user databases.
The island's Financial Supervisory Commission said the digital banking licences were granted to LINE Financial Taiwan, led by Japanese app operator LINE Group and including Taipei Fubon Commercial Bank and Standard Chartered, and to Next Commercial Bank, led by Taiwan telecom operator Chunghwa Telecom.
Another licence was granted to Rakuten International Commercial Bank, which was operated by Japanese e-commerce firm Rakuten Inc and Taiwan's IBF Financial Holdings.
"We're likely to see these new players in Taiwan focusing on specific markets in need of specialised services and products," said Fergus Gordon, who leads Accenture's Banking practice in Asia Pacific and Africa.
Gordon said millennials in search of microloans and cheaper offerings that work around the clock, or SMEs that want more efficient corporate banking or speedier credit approvals would be likely targets.
The commission said while it had initially planned to give out two new licences, because the three companies all had different business models and target customers, it had decided to give each of them a licence.
The FSC has no plan to issue more virtual bank licences at the moment, it added.
Across the strait in Hong Kong, the financial hub gave out eight new online-only banking licences earlier this year to groups, including affiliates of Alibaba Group Holding Ltd and a consortium led by Standard Chartered.
Singapore's central bank said in June it would issue up to five digital bank licences, and Reuters reported previously, quoting sources, that ride-hailing company Grab was considering applying.
Regulators in Thailand and Malaysia are also considering digital banking licences, while Korea's FSC had last week allowed internet company Kakao Corp to increase its stake in Kakao bank, one of two online-only banks in the country.
Incumbent banks need to respond quickly to the new competition, say analysts. Consultancy McKinsey estimates if digital banks gain significant market share and scale quickly, Asian banks' average return on equity, a measure of profitability, could drop to as low as 6.4% by 2023, from 10.1% last year.