The Taiwan Banker

In the past, financial service consumers had to go to bank branches or business locations. But the new vision of innovative finance is to create two concentric 360-degree ecosystems. The inner circle is “cross-industry,” breaking down the previous divisions between banking, securities, and insurance to provide one-stop services centered on customer demand; while the larger, yet-to-be-developed outer circle connects financial institutions with other industries through APIs, aiming to create a comprehensive financial ecosystem for realistic usage scenarios. At the same time, open data will allow banks to understand customer history for deployment in advance of future customer needs. The future of finance will involve the combination of the two. The global pandemic hits the financial industry In fact, open banking has been around for some time, but it is not easy for giants to pivot. The COVID-19 pandemic had a major impact on the global financial industry, as consumers were unwilling to go to physical branches and demand for zero-touch payments grew rapidly. The industry must spend more time to find and build financial ecosystems centered on customer experience, otherwise they will find themselves coming under increased pressure. The finance industry is actively deploying open banking, hoping to create ubiquitous financial services, and to integrate finance into more ecosystems. Cross-industry and cross-domain integration with third-party service providers (TSPs) through open application programming interfaces (open APIs) will create new opportunities in financial services and digital ecosystems which seamlessly integrate user experience. In the future, consumers will freely decide which banks to provide personal data and transaction information to, and which TSPs and companies will provide their services; banks and TSPs will provide financial services for all daily necessities. This will be a key opportunity for the financial industry to reorganize itself and tap new customers and business opportunities. Financial services embedded in partner services In November 2020, Taiwan’s open banking entered the second phase – open customer information – for which seven banks have been approved. If a consumer provides their personal information to one bank, when they apply at another, with their consent, that bank can automatically import their financial information, achieving automatic data exchange. Based on this, TSP operators can also provide consumers with account integration services, integrating mortgage, deposit, and fund investment information across banks. Later, open banking will enter the third stage of transaction information. With the customer's consent, transactions and payments will be shared. After the TSP gains access, it can directly link to accounts through its app for fund deduction, payment, adjustment, or allocation. Since the beginning of this year, many banks have put forward financial ecosystem plans, embedding their own financial services into partner services, or integrating co-branded services into their own apps, using membership and points accumulation to pull in customers from different ecosystems. Cooperation on financial ecosystems Mega Bank, which has already deployed its own ecosystem, has now obtained approval from the FSC to enter the second phase of open banking. In cooperation with Taiwan Depository & Clearing Corporation (TDCC), after identity verification, consumers can check their deposit balance and details through the TDCC e-passbook. The bank stated that it will continue cooperating with startups to develop customer-centric financial services, actively expand its financial ecosystem, and diversify its service scenarios. In addition, Hua Nan Commercial Bank has also cooperated with the TDCC to provide one-stop integration services for customer assets under the dual premise of information security and convenience. Hua Nan said that the second phase of its open banking will involve customer information and customer assets. High-quality, compliant TSPs will be required for this stage. They will be responsible for protecting consumer data, and therefore must have data protection and risk management capabilities. They are undergoing a rigorous selection process to ensure that they are financially sound, have information risk control capabilities, and pay attention to consumer rights. They must demonstrate determination to build Hua Nan’s financial ecosystem. Hua Nan pointed out that open banking is an international trend. In the future, through the open finance model, consumers will be able to use financial service as they wish, no matter the channel, industry, or scenario. Hua Nan will extend its reach in multiple directions, expand its service ecosystem, and continue to cooperate with startups on innovative cooperation plans to create a high-quality ecosystem. Consumers’ daily lives will be connected with finance. For example, insurance will be connected to health and medicine, temple finance will become available for religious believers, and online shopping will help shopping guide services earn business. Meanwhile, First Commercial Bank said that in order to realize the vision that “finance is life,” it is actively exploring the fintech demand to provide specialized financial services. It has cooperated with Taiwanese Housing, i3fresh, the Cloud Invoice app, Moneybook, Demoll, the 591 housing network, and other partners in different industries. Through this cooperation, it has jointly created financial ecosystems, providing everything from daily grocery shopping, payments, invoice winning notices, credit card bonus points inquiries, and discounts to one-stop consultation and mortgage services for housing, meeting a variety of customer needs, and closely connecting financial services to customers’ life journeys. Meanwhile, Taiwan Business Bank is also very active in open banking, and is currently cooperating with many TSPs through open APIs. For example, you can check the latest demand deposit and digital deposit rates in the FarEasTone "friDay Finance+" app. In the future, it will extent financial services to telecom customers. Integration of virtual and reality for full-journey services “According to our survey, the COVID-19 pandemic has made mobile phones the main medium for consumer payment and fund management,” said Amy Yang, Head of Personal Finance, China Trust Bank. “We estimate that the utilization rate of mobile transactions will increase by at least 30%.” In order to better meet the needs of consumers, China Trust has integrated the virtual and real aspects of tourism, entertainment, health/medical care, transportation, learning/education, online shopping, supermarkets/mass retail, F&B, and tourism, etc., to provide innovative, consumer-oriented financial services. China Trust is expanding both its virtual/online and offline offerings so that it does not miss any consumer. It is currently implementing several practices. The first is to move financial services from physical branches to consumer life scenarios: through the China Trust LINE discount platform, it has introduced 7 million customers to hundreds of ecosystem merchants. Second, to divert life scenarios financial demand back to online finance, it is connected to Yahoo real estate. When consumers search for properties for purchase there, they can import them back to China Trust for trial mortgage calculations with one tap. Furthermore, a points ecosystem is being used to meet consumer demand for different scenarios. For example, using China Trust’s LINE Pay points ecosystem, LINE Pay’s 3.8 million customers can easily spend and earn points at more than 200 brands, and earn discounts at 280,000 merchants. Finally, the whole journey is aimed at consumers. It integrates the products and services of multiple partners, such as China Trust and PetroChina Pay co-branded cards, rebate discounts, parking fees, payment deductions, road assistance, consumer payments, loan insurance, and other full-journey transport ecosystem services. “We will create a real and virtual integrated financial ecosystem in response to consumer needs," said Yang. “At the same time, through diverse strategic alliances, we will continue to enrich China Trust’s financial ecosystem.” Cross-silo collisions In order to provide these services, the industry requires cross-domain design thinking. Under the new concept of open banking, cross-silo collisions are needed to create new sparks. Banks also need to fully embrace cross-industry hiring, including data scientists, AI (machine learning) experts, UX designers, behavioral psychologists, and compliance risk experts. With the new orientation, consumers will not be required to actively contact their banks, but the bank may influence the consumer. The operating system will carefully observe and extract data from many indicators across life scenarios. Finding the most profitable key indicators here and achieving “drone-style precision strikes” are the keys to the future evolution of financial services. In the past, banks might send 1 million e-mails or make marketing calls to customers, but the average interaction rate was less than 1%. If hundreds of thousands of customers were disturbed by insensible messages or hang up every day, they would lose enthusiasm for their banks over time, and may even block the messages. The new financial model must provide more precisely targeted, customized and considerate services which are directly connected just when consumers need them. To realize 720-degree life financial services, banks will not only use transaction amount as a recommended match indicator, but will also focus on improving customer perception of value, so that customers will be more willing to increase their interaction and in-depth contact with life scenarios. This new model will create long tail benefits for not just the core services of banking, but also a multitude of niches across industries and scenarios.