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Taiwan's fintech sector lags for lack of capital, talent, legal tolerance

Over-regulation, lack of investment and a talent shortage are hampering efforts in Taiwan to develop technology for the finance industry, people in the field say, leaving it behind other parts of Asia.

Representatives of securities firms and information technology developers believe a "talent shortage and a lack of sense of law compliance have become two major obstacles" to the financial sector as it prepares to develop its own new technology, according to a survey by the Taiwan Stock Exchange in August. This sub-industry is usually called fintech for short.

"The most common difficulties for Taiwan's financial sector's transformation (to fintech) are threefold: first, capital, the second is talent, and finally the concept," said Julian Lin, Senior Director of Delta Electronics' Research Centre in Taiwan.

Intellectual property newsletter IP Observer says foreign companies will dominate fintech unless Taiwan moves faster.

Business Next has reported that China is "running at flight speed" with fintech development, leaving Taiwan where it "can’t see the taillight."

The Taiwan government itself acknowledges a potential shortfall in the field.

"As a regulator, we need to change our own mindset to be more open to better promote the market," Huang Tien-mu, acting chairperson of Taiwan's Financial Supervisory Commission, said at a forum in March, according to Asianinvestor.net.

The commission released a whitepaper in May outlining the role it hopes fintech will play in the Taiwanese finance industry by 2020.

But before then, Taiwan may be lapped by Hong Kong, mainland China and other Asian neighbors.

Officials in Taiwan point to several subsidized funds and startup accelerators put in place to develop fintech.

This year the commission founded the accelerator FinTech Development Foundation, which raised US$6 million in its first fundraising effort and plans eventually to raise a total of US$30 million to support fintech startups.

Hong Kong's government has allocated US$250 million for similar causes.

The commission in Taiwan has also established courses for startups and a mechanism to connect people in the industry.

Although the whitepaper promises the commission will establish a way of quickly adapting to financial services made possible by fintech processes, many types of fintech remain effectively off limits.

Ku Chia-chi, founder of the artificial intelligence (AI) advisory firm Kuchi, took his fintech startup to Singapore.

Kuchi joined Singapore's StartupBootcamp FinTech accelerator. His firm's flagship product, called Whisker, bills itself as a data-driven artificial intelligence investment analysis system for investors. Its core business is to follow stock markets and make recommendations.

The government whitepaper says artificial intelligence stock advisory services are being "studied."

"I talked to Taiwanese banks," Ku told Business Next. "The first thing they asked was, 'Is this permitted (by law)?' The FSC stressed in January that they will not permit AI financial advising services, so as a result the mindset of the whole finance industry is even more restricted.

"We don't need a bunch of onlookers to tell us 'That's against the law, it's too dangerous,'" he said "We need proper help, such as providing valuable data."

Ku found Singapore's financial sector to be more accommodating.

"(The companies) in Singapore aren't afraid to do R&D on AI financial analysis," he said. "We aren't burdened or restricted."

Startupbootcamp, the Singapore government, financial firms and startups are working together in the Southeast Asian city state to find ways of removing whatever limits remain, he said.

Banks in Singapore are more open minded than peers in Taiwan as they think about opportunities and the "potential value of using our technology in the future," Ku added.

But Taiwan was not necessarily destined to play catch-up with Asian neighbors in regional financial technology, Lin of the Delta research center said.

"Take API Management for example," Lin said, using the abbreviation for application programming interface.

"Taiwan was the first to have Internet banking in the Greater China area," he said. "Taiwan was the first to use IBM's MDM (Master Data Management). Taiwan was, in fact, the first on many things.

"However, possibly because of the (banks') limited scale and willingness to engage in continuous investment, some banks in Taiwan got further, but not everyone," he said.

In China, he estimates, the Industrial and Commercial Bank of China (ICBC) employs more than 10,000 tech engineers and China Guangfa Bank employs several thousand IT personnel.

Taiwanese fintech developers also file a relatively small number of patents.

According to a Taiwan Intellectual Property Office report in July, Taiwanese financial institutions put few significant resources into fintech patents.

Over the past 11 years, of 801 fintech patents granted by the patent office, only 12 went to financial institutions.

Chinese, American and Japanese firms have filed relatively large numbers of fintech patents in Taiwan. The only Taiwanese firm to file more than 100 is the dominant telecom provider Chunghwa Telecom. Most of those were for e-commerce.

"What the government should do is to get startups and financial institutions to meet face to face and find the opportunities for strategic cooperation, that's what we truly need instead of just always telling us (startups) to participate in hackathons or competitions, but with no further opportunities for cooperation," said Kersey Shang, CEO of the Taiwanese startup iDGate.