C A S E S T U D Y Open Access
FinTech in Taiwan: a case study of a Bank’s
strategic planning for an investment in a
and Binjie Luo
Boise State University, Boise, USA
Full list of author information is
available at the end of the article
Introduction: Since 2015 is the year of FinTech in Taiwan, it is worth investigating
the challenges that emerged when banks were encouraged to invest in FinTech
companies for collaboration. This study aims to identify the strategic considerations
in the process of searching for FinTech investment targets.
Case description: This study used a case study investigation of a top-5 bank in
Taiwan. The major data sources include the meeting notes of the FinTech investment
task force and interviews with the team members. Co-opetition theory was adopted as
the theoretical framework and interview questions were derived from the PARTS
strategies in co-petition theory. The results relate to: (1) the strategic goals of
FinTech investment, (2) the added value from FinTech companies, (3) criteria in
selecting candidates in the same FinTech area, (4) choosing to work as either a
cooperator or a competitor, and (5) barriers from policies and regulations.
Discussion and evaluation: This study has several findings: (1) regulations and
policies shape FinTech’s development; (2) banks, technology companies, and
customers are not “FinTech ready;”(3) Compare top-down with bottom up strategies;
(4) banks and FinTech companies have complex relationships; (5) it is unlikely that
Taiwan will produce FinTech disruptors in the near future.
Conclusion: The findings and discussion can benefit researchers and administrators
in finance-related industries. More studies are desired to observe long-term development
in terms of how companies collaborate or compete in specific FinTech areas.
Keywords: FinTech, Taiwan FinTech Industry, Investment in FinTech, Bank 3.0, Taiwan
bank industry, Co-opetition Theory, PARTS
In January 2015, the Finance Supervisory Commission in Taiwan (TFSB) announced
the “Creating the Digital Finance Environment 3.0 Project”that aims to relax restric-
tions on online banking, especially in online applications (Financial Supervisory
Committee 2015a, 2015b, 2015c). The first wave required all banks to offer the online
financial services listed in Table 1 by the end of 2015 (Financial Supervisory Committee
2015a). The policy was inspired by a book titled “Bank 3.0: Why Banking Is No Longer
Somewhere You Go but Something You Do”(King 2012), which predicted the disappear-
ance of most bank branches in the near future and that most financial services offered in
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Hung and Luo Financial Innovation (2016) 2:15
traditional branches will be transferred to online environments (King 2012). A bank is no
longer the only center for all financial services. E-commerce or telecommunication com-
panies could create new forms of financial services using technology to replace the role of
banks. To decrease the impacts of the coming trend, the TFSB mailed an official order to
all banks in Taiwan asking all domestic banks to propose a strategic plan to adjust the
structure of human resources via training or career planning to meet the changes in
human resource demands in the future.
The coming trend of FinTech is a major cause of concern for the TFSB. This is
because “FinTech,”a combination of “Finance”and “Technology”that refers to the
combination of both domains that will lead innovative financial services to shift away
from an in-house approach to relying on external providers to deliver online and
mobile solutions in a timely manner. On the one hand, the disruptive innovation can
initiate new businesses and bring new job opportunities. On the other hand, it dam-
ages the basis of the banking industry, which is an important stable socio-economic
foundation for nearly all countries. FinTech companies can choose to be the “disrup-
tors”—players that enter the market to compete against existing financial institutions,
or “collaborators”—those primarily targeting financial institutions as customers.
Banks not only have to deal with challenges from potential disruptors, but also to col-
laborate with technology companies to win the competition.
A recent analysis indicates that the global FinTech investment growth continues in
2016, driven by Europe and Asia (Accenture 2016). Global investment in FinTech
ventures in the first quarter of 2016 reached $5.3 billion, a 67% increase over the
same period last year, and the proportion of investments going to FinTech companies
in Europe and Asia-Pacific nearly doubled to 62% (Venture Scanner 2016). However,
the report shows that collaborative versus disruptive FinTech ventures have different
investment patterns in different areas. Overall, funding for collaborative FinTech ven-
tures, which accounted for 38% of all FinTech investment in 2010, grew to 44% of
funding in 2015. In North America, the proportion of funding for collaborative
Table 1 First Wave of Digital Finance Environment 3.0 Project
Service Item Target Customer
Deposit Closing a deposit account Current deposit account holder
Opening a predesignated account Current deposit account holder
Approving payment transfer application via fax Current deposit account holder
Credit evaluation Agreeing to allow the bank to conduct online
Current deposit account holder
or loan account holder
Credit card Applying for new credit card Current deposit account or
existing credit card holder
Applying for microfinance Current credit card holder
Applying for installment Current credit card holder
Wealth management Opening a trust account Current deposit account holder
Completing “Know Your Customer”survey Current deposit account holder
Completing customer risk tolerance survey Current deposit account holder
Accepting or terminating agreement of trust
Current deposit account holder
Joint marketing Filling out joint marketing agreement Existing deposit account holder
Hung and Luo Financial Innovation (2016) 2:15 Page 2 of 16
FinTech rose from 40 to 60% and in Asia-Pacific, it increased from 7 to 16%. In Eur-
ope, however, the reverse trend was true. Funding for “disruptors”thererosefrom
62% of all FinTech investments in 2010 to 86% in 2015 (Venture Scanner 2016).
Since 2015 is the year of FinTech in Taiwan, it is worth investigating the challenges
that emerged when banks were encouraged to invest in FinTech companies for collab-
oration. The single case study approach is appropriate because it provides researchers
with an in-depth look at the context, organizational relationships, knowledge, and ex-
periences of the target case (Benbasat et al. 1987; Cavaye 1996; Miles and Huberman
1994). This study adopts the co-opetition theory (Brandenburger and Nalebuff 1996) as
the theoretical foundation guiding the investigation. The results can reflect a bank’s
strategic planning in response to the era of digital finance. The findings and discussion
can benefit researchers and administrators in finance-related industries.
Wikipedia defines FinTech as “an economic industry composed of companies that use
technology to make financial systems more efficient”(Wikipedia nd). FinTech weekly
(nd) defines FinTech as “a line of business based on using software to provide financial
services.”The TFSB defines FinTech companies as belonging to one of the following
categories (Financial Supervisory Committee 2015c):
Using information or network technologies to aid the business development of
financial institutions to gather, process, analyze, or supply data (e.g., big data,
cloud computing, machine learning, etc.).
Using information or network technologies to improve the efficiency or security
of financial services or operating processes (e.g., mobile payment, automated
investment advisor, blockchain technology, biometrics, etc.).
Designing or developing other digital or innovative financial services based on
information or technology.
As mentioned earlier, aggregated global investment in FinTech ventures in the first
quarter of 2016 reached $5.3 billion, a 67% increase over the same period last year
(Accenture 2016). Based on Venture Scanner’sreportforthe4
quarter of 2016 (Venture
Scanner 2016), FinTech companies can be classified into the following categories:
Banking Infrastructure (114 startups, 1.5B funding)
Business Lending (181 startups, 9.8B total funding)
Consumer and Commercial Banking (66 startups, 1.5 B total funding)
Consumer Lending (264 startups, 16.7B total funding)
Consumer Payments (182 startups, 9.5B total funding)
Crowdfunding (68 startups, 436 M total funding)
Equity Financing (137 startups, 738 M total funding)
Financial Research and Data (79 startups, 824 M total funding)
Financial Transaction Security (101 startups, 1.6B total funding)
Institutional Investing (142 startups, 781 M total funding)
Hung and Luo Financial Innovation (2016) 2:15 Page 3 of 16
International Money Transfer (59 startups, 1.5B total funding)
Payments Backend and Infrastructure (181 startups, 10.4B total funding)
Personal Finance (194 startups, 2.7B total funding)
Point of Sale Payments (164 startups, 7.6B total funding)
Retail Investing (150 startups, 1.6B total funding)
Small and Medium Business (SMB) Tools (183 startups, 7.3B total funding)
Among these categories, Consumer Lending, Personal Finance, and SMB Tools
attracted the most startups, and Consumer Lending, Payment Backend, Banking Infra-
structure, and Business Lending attracted the most funding. Figure 1 shows the leading
companies in some of these categories (Venture Scanner 2016).
The report aggregated data for North American, Europe, and China. When comparing
actual startup and total funding numbers in Venture Scanner’sreportwiththeTFSB’sFin-
Tech definition, the TFSB’s blueprint differs from the actual situation in other countries.
FinTech in Taiwan
The TFSB declared 2015 as the year of FinTech by announcing a series of actions to
promote its development in Taiwan. First, all domestic banks must offer twelve online
financial services by the end of 2015 (Financial Supervisory Commission 2015a).
Second, the TSFB announced eleven big data application projects, including govern-
ment open data (after de-identification) in real estate credit evaluation, transaction data
in the stock market, personal credit card transactions, and fraud statistics, and over 900
other finance-related datasets (Data.Gov.Tw 2015). Third, the banks’shareholding ratio
was relaxed from 5 to 100% for FinTech company investments (Financial Supervisory
Committee 2015c). Fourth, the TSFB set up the FinTech office, promotion funds, and a
startup base (Financial Supervisory Committee 2016a). Finally, the TSFB published a
Fig. 1 Leading FinTech Companies
Hung and Luo Financial Innovation (2016) 2:15 Page 4 of 16
FinTech white paper in 2016 (Financial Supervisory Committee 2016a). Taiwan’s gov-
ernment aims to attract 5 billion TWD in total funding and at least 30 startups.
Among these actions, some are regulations that allow banks, insurers, or other finance-
related companies to operate the digital finance businesses listed in Table 2 (Financial
Supervisory Committee 2016a). Among these regulations, the “Regulations on Bank and
Financial Holding Company Investments in FinTech Companies”(Financial Supervisory
Committee 2015c) allows bank and financial holding companies to invest in FinTech
companies and own 100% of the shares. The other regulation, “TheRegulationonInfor-
mation Services and Finance Technology Industries Determined by the Competent
Authority as Finance-related Industries”(Financial Supervisory Committee 2015d) further
defines the scope of FinTech companies in which banks and financial holding companies
can invest. Appendix A provides a detailed summary of these two regulations.
The TFSB’s FinTech Development Strategy White Paper (Financial Supervisory
Committee 2016c) outlines a strategic framework identifying the following major de-
velopment dimensions (see Fig. 2): payment, insurance, loans, crowdfunding, invest-
ment management, and market supply (Financial Supervisory Committee 2016c).
Co-opetition describes a strategic framework that enables organizations to classify
players within their industry (Brandenburger and Nalebuff 1996). The model adopts
knowledge in game theory to observe and explain the behaviors of different kinds of
stakeholders within the same industry and beyond.
Table 2 Policies and Regulations to Supervise the Development of Digital Finance
Date Title Purpose Unit Target industry
1999.5 Contract template for personal
computer and internet banking
Allow banks to offer online
2014.1 Regulations governing the
conduct of equity crowdfunding
by securities firms
Allow securities firms to run
2014.8 Regulations governing the
conduct of online insurance
by insurance firms
Allow insurance firms to offer
2015.4 Regulations governing the
conduct of equity crowdfunding
by securities firms
Allow securities firms to offer
2015.5 The Act Governing Electronic
Allow banks and non-financial
companies with third-party
payment licenses to offer
2015.6 Rename “Regulations Governing
the Conduct of Online Insurance
by Insurance Firms”as “Regulations
Governing the Conduct of
E-commerce by Insurance Firms
Relax some regulations issued
2015.8 Regulations of bank and financial
holding company investing
Allow banks and financial holding
firms to invest in FinTech firms
and increase the shareholding
TFSB Banking, insurance,
and related FinTech
2015.9 Regulations on Information
Services and Finance Technology
Industries Determined by the
Competent Authority as
Define information service
industry and finance technology
TFSB Banks, insurance,
Hung and Luo Financial Innovation (2016) 2:15 Page 5 of 16
Bradenburger and Nalebuff (1996) argued that cooperation and competition exist and
are desirable in every industry (Levinson and Asahi 1995). When all players focus on
market growth, then they must cooperate to increase the benefits to all players (Hill
and Lynn 2003). At the same time, competition distributes the benefits earned by indi-
vidual players depending on their market shares. The theory provides a framework to
observe how interactions between players and their choices lead to different out-
comes or end states of the game. In addition, it helps administrators and researchers
to identify and explain the underlying mechanisms in a firm’s environment, and how
the firm can change these mechanisms to their advantage.
“Value Net”is the core concept in co-opetition theory. The theory has four types of
Customers: Parties to which the company directs its products and services.
In return, money goes from the customers to the company.
Suppliers: Parties who provide resources to the company. In return, money goes
from the company to the suppliers.
Competitors: The definition depends on perspective:
◦Customer perspective: “A player is your competitor if customers value your product
less when they have the other player’s product than when they have your product
by itself.”Your product behaves as a substitute for a competitor’sproduct—your
increase in market share will directly decrease your competitor’sshare.
◦Supplier perspective: “A player is your competitor if it is less attractive for a
supplier to provide resources to you when it is also supplying the other player
than when it is supplying you alone.”All firms compete with other
organizations for resources in quantity, quality, and price.
Complementors: The definition also depends on the following perspectives:
◦Customer perspective: “A player is your complementor if customers value your
product more when they have the other player’s product than when they have
your product by itself.”Complementors are the inverse of a competitor because
the demand for their products will increase the demand for your product.
◦Supplier perspective: “A player is your complementor if it is more attractive for
a supplier to provide resources to you when it is also supplying the other player
Fig. 2 Strategic Framework for FinTech Industry Development
Hung and Luo Financial Innovation (2016) 2:15 Page 6 of 16
than when it is supplying you alone.”When a market is small, it is difficult to
get resources delivered by guessing. When the market increases, suppliers begin
to adjust their offerings and make purchasing efforts easier for all acquiring firms.
Importantly, a single player can have more than one role; a player can be both a com-
petitor and complementor simultaneously. The market players can cooperate on the
“invisible”logistics side (e.g. develop common standards or return channels) and com-
pete on the “visible”market share side.
The authors further proposed five dimensions (PARTS) to identify strategies that
change the game, to a player’s own advantage.
Players: Players can use the Value Net to identify and categorize the current players
in the game. A company can examine all players in the value net and determine the
roles of individual players (customers, suppliers, complementors, and competitors).
Bringing more players into the game can have positive effects on a company (e.g.
increasing suppliers can decrease costs; extra complementors increase the value of
a company’s product; and a competitor can be brought in to give customers the
feeling that they have choice.).
Added value: Added value is an indicator to estimate benefits that individual players
obtain from the value net. A company can identify its added value from the other
players’point of view and take action to increase this added value in order to increase
profitability (e.g., a company can offer a loyalty program to enhance customer loyalty
or attract more complementors to the value net to increase its own added value).
Rules: In every business, many written and unwritten rules apply. Rules can be
governmental rules, contracts with suppliers, contracts with customers, and general
market rules. Although many rules cannot be changed (such as governmental
rules), contracts provide opportunities to change the rules on a smaller scale.
Tactics: Tactics are defined as “actions that players take to shape the perceptions of
other players.”Brandenburger and Nalebuff argue that players always take rational
actions in light of that player’s perception of reality. A company can influence other
players’perceptions and actions by deliberately sending out certain signals. It is
necessary, however, to be aware of these perceptions to be able to influence them.
Scope: In most cases, a game is not isolated, but linked to other games via its players.
A firm can extend its business to other games when it adds value to the other game
and increase its profitability. On the other hand, a firm can deliberately keep two
games separate when linking the games would cannibalize its traditional business.
Linking and de-linking games can occur by recognizing complementary markets,
via special clauses in contracts, or by influencing the perceptions of other players.
This research conducts a case study to identify the strategic considerations in the
process of investing in a FinTech company. The investigation target is a top-5 bank in
Taiwan. The major data sources include the meeting notes of the FinTech investment
task force and interviews with the team members. Derived from the PARTS strategies,
the interview questions include:
Hung and Luo Financial Innovation (2016) 2:15 Page 7 of 16
Banking industry in Taiwan
The banking industry in Taiwan is worth trillions of TWD and is highly protected and
regulated by the government. It accounts for both 6.56% of GDP and 7.4% of all jobs in
Taiwan. As of June 2016, Taiwan had 39 domestic banks with 3,433 domestic branches
and 464 overseas branches or representative offices (see Table 3). The data indicate that
you can find a bank branch every 3.7 and an ATM every 1.32 km
on average. For a
small island with only 23 million people, the banking industry is an extremely highly
competitive market. Overall, the development of Taiwan’s banking industry can be di-
vided into three stages (Chiu 2011):
1949–1960 (the embryonic period): The loan market was established.
1961–1989 (the development period): The stock market, bond market, and foreign
exchange market emerged.
1990–2012 (the consolidation period): An important period of liberalization and
internationalization for the banking industry, with key deregulation including (1)
allowing foreign banks to set up branches, allowing the establishment of new
commercial banks, allowing the establishment of financial folding corporations,
and allowing the privatization of public sector banks, etc.
To address the coming trend of digitalization in finance, the TFSB proactively an-
nounced a series of deregulations after 2014 to encourage financial innovation. Therefore,
we might call 2014 the beginning of the fourth stage—the innovation period.
Policy and regulatory barriers
In Taiwan, the bank industry is highly protected and regulated; banks are prohibited
from engaging in any business that does not have related policies or regulations.
What are the strategic goals when searching for potential FinTech candidates? ✓✓
What is the added value(s) from FinTech candidates? ✓✓ ✓
When facing competition from other banks or FinTech companies, what is T bank’s strategy
(as a cooperator or a competitor)?
When selecting candidates in the same FinTech area, what are the major criteria? ✓✓✓✓
Is there any plan to cooperate with competitors or complementors? ✓✓✓✓✓
Are there any barriers from Government policies and regulations? ✓
Table 3 Head Offices and Branches of Financial Institutions in Taiwan (End of June 2016)
Head Offices Domestic Branches Overseas Offices/Branches
Domestic banks 39 3,433 464
Foreign bank branches 27 37 NA
Chinese bank branches 3 3 NA
The Postal Savings System 1 1,320 –
Credit cooperation 23 259 –
Credit departments of farmers’association 282 823 –
Credit departments of fishermen’s association 28 43 –
Total 402 5,918 464
Hung and Luo Financial Innovation (2016) 2:15 Page 8 of 16
Therefore, when the government requested that all banks engage in innovation, they
were not sure what to do at first. In addition, there are too many limitations or regula-
tions for new startups. For example, the minimum capital for a new startup to apply
for a third-party payment license is ten million US dollars. Additionally, FinTech com-
panies cannot manufacture hardware and must derive more than 51% of their annual
operating costs or operating revenue from financial enterprises (including financial
holding companies, banks, securities firms, insurance companies, and their subsidiaries)
(Appendix A). Regulations also make it difficult for foreign FinTech companies, such
as P2P lenders, to enter Taiwan’s market.
Case study bank
The target bank (T bank) is under a financial holding corporation and ranked as one of
the top 250 banks worldwide and among the top 5 in Taiwan. It has 190 branches, 34
overseas branches/representative offices, and over 5,000 domestic employees (Financial
Supervisory Committee 2016b). Table 4 compares T bank with other domestic banks in
major business areas (Financial Supervisory Committee 2016b).
Overall, T bank’s strength is in Corporate Finance, especially in SME loans. Com-
pared to the other top-tier commercial banks, T bank’s personal finance business is a
weakness. In 2015, T bank renamed the division of electronic finance as the division
of digital banking to declare its ambitions to develop digital banking, including online
banking, electronic payment, FinTech, and big data analytics. The Chairman of T
bank aims to cultivate personal finance as another star business by means of FinTech
and big data analytics. Therefore, the bank established the FinTech, Artificial
Intelligence, Blockchain, and Maker Base task forces to search for the best solution
divisions of digital banking, information technology, personal finance, corporate
finance, venture capital, foreign exchange markets, and compliments and legislative.
These groups are led by two vice presidents and report to the President and Chair-
man directly. After over 7 months of effort, T bank identified the most appropriate
target and completed their first investment in 2016. The task force continues to look
for other suitable candidates. The next section describes the bank’sprocessfor
FinTech investment by research question.
Table 4 T bank Compared to all Other Domestic Banks in Taiwan
Statistical indicators Rankings
Loans to SMEs 1
Active credit cards 11
Profit before tax 4
Total loans 7
Number of domestic branches 2
Number of overseas branches 2
Hung and Luo Financial Innovation (2016) 2:15 Page 9 of 16
The strategic goals of FinTech investment
Signing purchase contract with external technology vendors is very common for banks
in Taiwan. However, looking for a complementor as a partner is totally a different story.
It was therefore a long exploration process for T bank to determine the following stra-
Look for a strategic partner rather than targeting ROI only
Look for a technology company that can co-develop unique financial services
with T bank’s employees
Look for new startups or small companies with innovative expertise.
Added value from FinTech companies
The task force started with a quick survey of the list of current vendors, FinTech-
related reports or contests, and recommendations from internal and external channels
to compile a list that contained 36 FinTech or FinTech-like companies (Table 5). They
then examined and discussed each company in the first round of screening and selected
16 for on-site visits.
Below describe insights from the task force by FinTech categories.
Fintech companies in the payment category can be divided into two types:
Third-party payment and point of sale payment. The third-party payment
companies attracted all banks’attentions in 2015 because these companies will
offer services in online, offline, and online-to-offline environments. In May 2015,
the TFSB announced “The Act Governing Electronic Payment Institutions”
to supervise third-party payment institutions. The act allows banks and non-
financial companies to apply for third-party payment licenses. Five non-financial
companies were approved in 2015 and 2016, and each of these companies has
third-party payments as their core business, similar to PayPal. In addition,
10 banks (including T bank) and 12 e-commerce companies can also provide
third-party payments, though this is not their core business. E-payment services
are already up and running at all 10 banks, but none of the five third-party
companies can offer their services until 2017. These third-payment payment
Table 5 Candidate and Visited FinTech companies
Category Total companies Visited companies
Financial transaction security 3 1
Big data analytics 5 3
Banking infrastructure 4 0
System integration 7 0
E-payments 6 4
Point of sale payments 4 2
E-commerce 3 2
Internet of Things (IoT) 2 2
Blockchain 2 2
Hung and Luo Financial Innovation (2016) 2:15 Page 10 of 16
companies are very welcome bank’s investment in order to form a stronger
alliance. Therefore, they limit the shareholding percentage to 5–10%, in order
to have more bank partners. Although the third-party payment attracted many
attentions in the beginning, banks predict only one or two companies will
survive due to the low profit margin. Point of sale payment is the other type
of payment companies whose major customers are physical retailers. These
companies mainly provide POS systems to retailers. In the past, credit card
readers and POS systems are different devices and a store usually needs to
prepare at four credit card readers, one pre-paid card reader, and one POS
system. Due to the integration of hardware (all-in-one card reader with cloud-
based POS functions) and software (integrated payment API), the all-in-one
smart POS system can satisfy assorted payment needs from retailer stores.
In addition, the all-in-one smart POS system can accept all kinds of payment
tools, including cash, credit card, pre-paid card, gift card, and other payment
types via TSM, HCE, TSP, and QR Code technologies. A well-known POS
company became T bank’s first FinTech investment target. More details will
be introduced later.
Banking infrastructure and system integration
The task force filtered out technology/solution providers because they felt that
these companies concentrate only on their current business and are not ready
for a higher-level challenge. Therefore, they selected none of companies in the
banking infrastructure and system integration for online-site visits.
TFSB tended not to set up any regulations on P2P lending (Financial Supervisory
Committee 2016d). In addition, TFSB encourages banks to collaborate with P2P
companies on the lending business. Right now there are two P2P companies on the
market (https://www.lend.com.tw and https://lnb.com.tw/). Although no matter
personal loan and corporate loan are not hard to be approved by banks at all, many
banks, including T bank, are preparing to set up their own online lending platform
instead of collaborating with P2P companies. For example, SinoPac bank’sbidmoney
platform (https://bidmoney.sinopac.com) is the first and the only P2P platform from
bank. It will be expected more similar platforms will appear in these 2 years.
Big data analytics
Big data analytics companies are hard to complete with large analytics companies,
like SAS, IBM, and TaraData. Therefore, the local big data analytics companies all
focus on the techniques of Chinese text mining. Chinese might be the hardest
language to perform Natural Language Processing, due to its unique characteristics.
Due to bank’s data contains sensitive personal information, T bank is more
interested in buying or cultivating its own analytics team. These local analytics
companies can be solution providers of intelligent automatic customer services and
sell their products to all banks. They are not interested in becoming a specific bank
Blockchain is another area which attracts lots of attentions. Maicoin and Gcoin are
two major companies in Taiwan with potential bank partners. In addition, TFSB
regards blockchain as a crucial foundation of the FinTech industry. Therefore, TFSB
Hung and Luo Financial Innovation (2016) 2:15 Page 11 of 16
is planning to set up a national blockchain for all banks. Blockchain contains
two major flows, virtual currency flow and information flow. Right now banks
are more interested in the aspect of information flow. Four banks will collaborate
with Maicoin. Another two banks will collaborate with Gcoin. CTBC bank just
announced that they joined the R3 alliance. Therefore, more investment on the
blockchain from banks can be expected in the future. T bank’s chairman also
assigned a taskforce to search for blockchain partners. Because related
information is classified, no further information can be revealed in this article.
After the on-site visits, T bank moved on from most candidate companies for
several reasons: (a) T bank would have difficulty developing any unique financial
services with these companies (no added value) because they are more like
solution vendors; (b) the stock price per share (PE ratio) is too high, and (c)
recent analysis indicates that cash and credit cards are still the major payment
tools (59 and 58.1%, respectively) (Market Intelligence & Consulting Institute
2016). In addition, people can withdraw/wire cash, pay transaction fees, pick up
online shopping goods, and buy electronic tickets at any supermarket. With the
highest density of supermarkets (over 10,000) in the world (Taiwan Today 2014),
payment is convenient in Taiwan. Whether other payment methods can become
mainstream is still under observation.
Criteria to select FinTech candidates
Since banks do not know how to design an innovative financial service using technol-
ogy and technology companies do not know how to apply their knowledge to finance,
T bank had difficulty identifying qualified candidates. Therefore, due to the limited
number of FinTech companies available, they did not identify more than one candidate
with potential in the field.
Cooperator or a competitor?
In the highly competitive market, such as mobile payments or e-wallets, T bank tended
to work as a cooperator rather than a competitor. T bank regards these products as
“must have”services for all banks, which they can purchase from solution vendors.
Their goal is to compete with other banks on some unique financial services, such as a
P2P platform for SMEs. However, they could not find a company in this area.
In Spring 2016, T bank invested in a FinTech company offering smart POS systems
based on several strategic considerations. First, retailers currently tend to have more
than three devices for different payment options. The smart POS system integrates all
kinds of payment options in a small mobile device, which is a very attractive solution
for T bank’s customers in retail. Second, T bank and the FinTech company are comple-
mentors; the latter is a major POS system provider for top retailers in Taiwan. As T
bank’s strength is in SME finance, it can help the FinTech company to expand its
market share to small and medium sized retailers. On the other hand, the FinTech
company can assist T bank in expanding its personal finance business, a key goal, es-
pecially in issuing credit cards or affinity cards. Finally, the smart POS system
Hung and Luo Financial Innovation (2016) 2:15 Page 12 of 16
contains enterprise resource planning (ERP) modules, data analytics (cloud-based),
and data visualization (cloud-based) to track retailers’daily business activities. It en-
ables T bank and the FinTech company to develop innovative financial services and
use the POS system as the customer-end interface.
Discussion and evaluation
Regulations and policies shape FinTech’s development
Government regulations and policies significantly shape an industry’s development.
The most famous case is the influence of deregulation on the US telecommunications
industry in 1982, which resulted in the industry’s liberalization (Los Angeles Times
1995). Thus, researchers should track how the series of deregulations will shape
Taiwa n ’s FinTech industry development. At the same time, restrictions in the current
regulations prevented some overseas FinTech companies from offering their financial
services in Taiwan. Based on authors’own observations, the deregulation will con-
tinue, though the banking industry will maintain its unique position and high govern-
ment protection in the future.
Banks, technology companies, and customers are not “FinTech ready”
Compared to other countries, Taiwan is behind in the revolution of financial
digitalization in terms of practical development, customer adoption, and legislation. It
seems that Taiwan’s banks have been protected for too long. Banks, technology com-
panies, and customers are not “FinTech ready.”T bank’s Chairman and President also
sensed the problem and think that the best way forward is to cultivate collaborative re-
lationships with startups. Therefore, T bank will set up a maker base and assign a group
of T bank’s employees to collaborate with these companies on R&D. A follow up study
of these efforts would be beneficial.
Mobile payment is another example. In 2015–2016, Apple pay, Line pay, WeChat
pay, Alipay, and domestic third-party companies introduced assorted innovative pay-
ment methods via TSM, HCE, TSP, and QR Code technologies (Financial Supervisory
Committee 2016c). However, based on TFSB statistics, credit cards are still the most
popular payment method. Most transactions counted as mobile payments were credit
card transactions linked with apps. Among these innovative payment technologies,
WeChat pay and Alipay attracted a lot of attention in 2015. With a potential 60 billion
TWD in spending annually, tourists from China account for about 35% of annual tour-
ists to Taiwan. Therefore, although only tourists from China can use these two payment
options, three banks collaborate with Alipay and four banks collaborate with
WeChat pay. These banks are interested in both the Chinese tourists and in cross-
border e-commerce transactions and cross-border tuition payments (there are about
8,000 Chinese students studying in Taiwan). The high number of new mobile pay-
ment options opens another research topic in terms of how these payment compan-
ies/technologies collaborate or compete.
Complex relationships among banks and FinTech companies
Banks and FinTech companies have complicated relationships. T bank chose to collab-
orate with other banks on “must have”financial services but compete with them on
Hung and Luo Financial Innovation (2016) 2:15 Page 13 of 16
unique technology-based services. The authors assume that other banks have similar
strategies because some FinTech companies have refused to remain “xx bank exclu-
sive,”especially when their products are more like “must have”services. Therefore,
these companies welcome investments from banks and limit their shareholding. On the
other hand, startups might like the “exclusive”approach due to the high percentage of
investment from a specific bank. However, there is a potential risk that they will not
gain contracts with other banks in the future.
Compare Top-down with bottom-up strategies
T bank collaborates with other banks on “must have”financial services, such as mobile
payments, by collaborating with third-party payment companies so customers can link
their bank accounts or credit cards with the third-party wallet or apps. Because these
third-party companies aim to cultivate their own payment ecosystem, the authors call
this a top-down strategy. On the other hand, the FinTech company T bank invested in
has been working as a solution provider in the retail industry for more than 20 years. It
has a solid buyer base and knows buyers’needs. Obviously, the bottom-up strategy is
more attractive to T bank because the collaboration can help the bank expand its
current business and discover a new “blue ocean.”
Taiwan will have difficulty producing FinTech disruptors in the near future
Taiwan is not a friendly environment for FinTech startups: firms in this industry face
high entrance barriers, high competition, and a market size that is not attractive to new
challengers. Second, most financial services are very convenient with low service fees.
Therefore, customers might feel that innovative financial services are better than ser-
vices from existing banks. However, the adoption rate will be slow, just as in credit card
versus mobile payments. Third, traditional financial institutions are highly protected by
the government. Put another way, the government does not want disruptors because
they will damage the foundations of these traditional financial institutions. Therefore,
it is unlikely that Taiwan will produce FinTech disruptors in the near future. Instead,
almost all FinTech companies will be collaborators aiming to provide solutions for
traditional financial institutions.
The case study reveals the strategic consideration in the process of searching for FinTech
investment targets. It seems Taiwan’s government aims to cultivate FinTech collaborators
rather than disruptors. It is still at the embryonic stage for FinTech industry in Taiwan.
Therefore, more studies are desired to observe long-term development in terms of how
companies collaborate or compete in specific FinTech areas.
Regulations related to FinTech investment
–Information service enterprises are firms whose main business is electronic data
processing closely related to the data processing operations of financial
institutions; e-commerce trading information processing involving the accounts
Hung and Luo Financial Innovation (2016) 2:15 Page 14 of 16
of financial institutions; or research, development, and design of financial infor-
mation systems to support the business development of financial institutions.
–Financial technology enterprises are firms whose main business is one of the following:
Using information or network technologies to aid the business development of
financial institutions in data gathering, processing, analysis, or supply (e.g., big
data, cloud computing, machine learning, etc.).
Using information or network technologies to improve the efficiency or
security of financial service or operating process (e.g., mobile payments,
automated investment advisor, blockchain technology, biometrics, etc.).
–Designing or developing other digital or innovative financial services based on
information or technology.
–The main business of the aforementioned information service enterprise or
financial technology enterprise may not include the manufacture, sale, or
leasing of hardware equipment. If such information service enterprise or
financial technology enterprise provides hardware equipment, the purpose of
the hardware equipment must be congruent with the nature of the business or
data mentioned in the preceding paragraph and associated with the design of
–For information service enterprises or financial technology enterprises that engage
in the businesses or activities provided in Point 2 and later section of the
preceding point, the portion of its annual operating costs or operating revenue
derived from financial enterprises (including financial holding companies, banks,
securities firms, insurance companies, and their subsidiaries) and financial services
shall make up 51% or more of its total operating costs or operating revenue. The
preceding provision does not apply if the investment of the bank or financial
holding company in said information service enterprise or financial technology
enterprise is for the purpose of a strategic alliance or enhancing business
cooperation, and the bank or financial holding company does not have control or
material influence over the enterprise as provided in the Regulations Governing
the Preparation of Financial Reports by Public Banks or Regulations Governing
the Preparation of Financial Reports by Financial Holding Companies (e.g.,
shareholding in the enterprise is below 20%).
–Banks and financial holding companies shall, within 1 month after the end of each
fiscal year, report the percentage of annual operating costs and operating revenue of
their invested information service enterprise or financial technology enterprise derived
from financial enterprises and financial services to the competent authority for
recordation. Should the percentage fail to comply with the preceding point, the bank
or the financial holding company shall make adjustments to become compliant within
2 years from the year of reporting, and may apply for one extension for a period of 1
year with reasons stated if the adjustment cannot be completed within the prescribed
period. If the bank or the financial holding company is still non-compliant past the
prescribed and extended period, it shall submit a share disposal plan to the competent
authority to reduce its amount of investment or shareholding in the information ser-
vice enterprise or financial technology enterprise to not more than 5% of the total
paid-in capital or issued and outstanding shares of the enterprise, or make adjustments
to become compliant with the latter section of the preceding point.
Hung and Luo Financial Innovation (2016) 2:15 Page 15 of 16
J-LH: data collection, data analysis, literature review, and manuscript writing. BL literature review and manuscript
writing. Both authors read and approved the final manuscript.
The authors declare that they have no competing interests.
Boise State University, Boise, USA.
Agricultural Bank of China, Sichuan, China.
Received: 2 November 2016 Accepted: 23 November 2016
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