The Taiwan Banker

Ever since the first virtual banks, or neobanks, came into being in the UK in 2016, the world has come to expect a new type of finance. Along with the integration of various other technologies, fintech has become one of the most important trends in the financial industry in the past 10 years. Neobanks use digital channels to interact with customers, reducing personnel and facility costs. With the advancement of the internet and popularity of social platforms, they have expanded rapidly, challenging traditional banks and bringing a new service experience. Despite the surge in demand for remote financial services following the pandemic, however, traditional banks have not shown signs of decline, but rather have blunted the advantages of challengers by quickly providing desktop and mobile interfaces. They have also improved market competitiveness and profitability through application of original customer data, restricting neobanks to younger, online customers who still need to accumulate assets, and slowing their development. Cryptocurrency has also grown slower than expected. Promoters originally hoped to use decentralized technology to break through the shackles of government control, returning currency pricing to the essence, no longer driven by factors like inflation and fiat exchange rates. Most recently, however, cryptocurrencies have become capital market investment targets, with price fluctuations comparable to those of precious metals. Frequent reports of counterfeiting, bankruptcies and fraud have further undermined earlier promises, making regulation necessary, according to a growing consensus. There have been several reasons for these disappointments. First, the optimists underestimated the adaptability of traditional banks. The latter recruited technological talent, transformed their service processes as quickly as possible, and provided more convenient digital services. Beyond that, trust is a priceless asset in the financial industry. A banking license includes guarantees on capital, compliance with legal regulations, and customer and social risk assessment, as well as compliance with industry standards, shaping not only customer perceptions, but also financial habits. Fintech companies are as of yet unable to replicate this trust threshold. Traditional banks have resolutely survived, so what is the next step for fintech development? In addition to closer integration with traditional banks for better interplay between trust and technology, it should also be feasible for fintech to return to its original objective of financial inclusion. After all, the big claim in the early development of fintech was that neobanks should serve the clients traditional banks considered too risky, allowing more consumers to experience the convenience of finance. Beyond momentary consumer satisfaction, however, when consumers have easy access to too much credit (more recently even turning into “buy now pay later”), fintech’s financial inclusion will only allow the financially disadvantaged to take on more debt, pay more interest, and pay higher prices. My hope is that fintech can help realize the ideal of financial inclusion for more of the financially disadvantaged – not the fintech that helps more people to borrow and spend, but the fintech that can help consumers to save money and even pay back debts.