The Taiwan Banker

Taiwan is home to many venerable businesses that have become industry leaders over more than a century, spanning pastries, tea, traditional Chinese medicine, food, condiments and household goods. These include Kuo Yuan Ye Foods, Wang De Chuan Tea, Liu An Tang Chinese Medicine, Siluo Datong Soy Sauce, and Lin San Yi. Few sectors, however, can claim that more than half their institutions have operated for over a century. Taiwan’s credit cooperatives are a notable exception. Of the country’s 23 credit cooperatives, 14 have surpassed the century mark – more than 60%. They range from the First Credit Cooperative of Keelung, founded in 1911, to the Kinmen Credit Cooperative, established in 1964. Credit cooperatives were originally organized by prominent residents. Their directors, supervisors, and boards were often made up of community leaders, physicians or teachers, giving the institutions deep local roots. The upper floors of the First Credit Cooperative of Keelung’s headquarters, for example, were once leased to a miners’ hospital. The site of the Third Credit Cooperative of Kaohsiung’s business department is directly connected to the former Third Credit Cooperative Community Hospital. Credit cooperatives have also worked with leading local hospitals on numerous charitable initiatives, including MacKay Memorial Hospital, Mennonite Christian Hospital, and Tzu Chi hospitals. Education is another longstanding priority, including standard scholarships and financial assistance for students from disadvantaged families or cooperative member households. Some cooperatives have also gone further by establishing schools with strong local reputations, including First Credit Cooperative Kindergarten in Tamsui, Er Xin High School in Keelung, and San Sin High School of Commerce and Home Economics in Kaohsiung. The Second Credit Cooperative of Hualien provides payroll services to 60% of the county’s elementary, junior-high and senior-high schools, and collects tuition and other fees for 45% of them. Such figures underscore the importance of credit cooperatives in Taiwan’s economic development. As Taiwan evolved from an agricultural economy into an industrial and commercial one, its economic structure changed dramatically. Today, technology accounts for more than half of the country’s GDP. Meanwhile, as the birth rate has fallen sharply, people aged 65 or older now exceed 20% of the population, making Taiwan into a super-aged society. Aging buildings and urban renewal have changed residential patterns, while community ties have gradually weakened. These trends have affected credit cooperatives, whose business models have traditionally centered on local communities. They can no longer remain confined to a single township, city or county; meanwhile, regulations also have been liberalized. To diversify geographic risk and reach new customers, many have expanded into neighboring jurisdictions. The First Credit Cooperative of Tamsui followed the Tamsui River east into Taipei. The First and Third credit cooperatives of Hsinchu expanded north into Taoyuan and south into Miaoli, respectively. The Second Credit Cooperative of Hualien and the Fifth and Sixth credit cooperatives of Changhua opened branches in Taichung. The First Credit Cooperative of Hualien expanded through Taitung into Kaohsiung and Tainan. Entering unfamiliar markets with resilience and a commitment to warm, personal service, these institutions were faced with the challenge of strengthening their IT systems and cybersecurity to overcome the challenges of remote management and earn public trust. In 2022, in response to growing fintech and cybersecurity demands, the Second Credit Cooperative of Taichung moved its IT department to its Zhongxing Branch and expanded its use of open systems. Its modern equipment and secure facilities became an industry benchmark. Subsequently, the Second Credit Cooperative of Hualien and First Credit Cooperative of Tamsui also completed similar IT relocations and expansions. The First Credit Cooperative of Tamsui spent more than a year redesigning its mobile banking app and upgrading its content to improve service efficiency. It also began offering communities a free service for collecting management fees. More than 70% of residential communities in Tamsui have adopted the service, giving the cooperative a commanding local position. Its use of Mobile ID has further expanded its customer base and made financial services more accessible. To serve local corporate customers, the Second Credit Cooperative of Hualien became the first credit cooperative to establish an online corporate banking platform. It has also followed banks in planning the use of Mobile ID and introduced cardless ATM withdrawals. Fintech requires substantial investment in recruitment, retention and infrastructure. Such expenses may represent only a small share of a bank’s earnings, but they impose a proportionate burden on credit cooperatives. These institutions are also ineligible for tax credits on IT expenditure under the Statute for Industrial Innovation, and cannot escape the competition for technology professionals created by the higher salaries of the IT sector. Credit cooperatives have sought to reduce this burden by sharing peripheral systems through common platforms, but keeping costs reasonable while delivering systems on schedule remains another challenge. Facing intense competition from banks and fintech companies, credit cooperatives must strengthen services for members and customers. Their advantages include deep knowledge of local communities, field visits, counter service and home-based outreach. They must now complement these strengths with cross-industry partnerships that enhance customer loyalty. During the pandemic, all credit cooperatives implemented the PCODE 2566 digital identity verification mechanism on the shared ATM platform of Financial Information Service Co. (FISC), allowing the public to promptly receive government subsidies. They also joined Taiwan Pay and the TWQR platform developed by FISC, broadening the use of accounts. Customers can now use these accounts for retail purchases, household bills, loan repayments, cross-border payments in Japan and South Korea, and QR code fares on public transport. The electronic check platform also now has mechanisms for detecting unusual customer risks. Automation reduces routine administrative work, lowers the risk of checks being lost or stolen, and improves the efficiency of check financing. Individual institutions may have limited bargaining power when negotiating partnerships, particularly in a market shaped by financial holding companies and their cross-selling capabilities, but participation in electronic Direct Debit Authorization and real-time ACH collection and payment services creates new opportunities for cooperation. Customers no longer need to open multiple accounts for different services. This improves convenience while maximizing the benefits of strategic alliances among credit cooperatives. Applications include securities settlement, dividend payments, labor and national health insurance premiums, and local gas bills. Regrettably, however, National Health Insurance reimbursements to medical institutions remain outside this system, leaving a financial inclusion gap. The Ukraine war Iran war have profoundly affected the world since 2022 and 2026, respectively. Against this backdrop, the 2026 theme of the International Cooperative Alliance, “Cooperatives for a Peaceful World,” resonates with the theme of its Global Conference, “Building Bridges: Cooperative Contributions for a Peaceful World.” Together, they renew attention to the contributions cooperatives make to global welfare and the public good. Credit cooperatives are no exception. Wanggong has only two locally based financial institutions, one of which is the Lukang Credit Cooperative. The Second Credit Cooperative of Penghu has long supported fishermen through its Coral Fishermen Loan program. Credit cooperatives also maintain close ties with religious and community institutions that promote social values, including Tamsui Qingshui Zushi Temple, the Taoyuan Tudigong Cultural Museum, Lukang Longshan Temple, Kaohsiung Sanfong Temple, Hualien Sheng’an Temple, and the Tzu Chi Foundation. Charitable and educational foundations affiliated with credit cooperatives regularly organize 3-on-3 basketball tournaments, dragon boat races, concerts, mountain cleanups, and beach cleanups. Credit cooperative employees make up a familiar and quietly dedicated presence at these events. When Financial Supervisory Commission (FSC) Chairman Thomas Huang took office, he set out a policy vision of “advancing safety and development in parallel.” Its core priorities included retaining talent and capital through the Asian Asset Management Center (AAMC), strengthening capital resilience, promoting financial inclusion and advancing fintech. The AAMC has since made significant progress. The FSC has issued guidelines encouraging the financial sector to give back to society, and approved small-value cross-border remittance services for electronic payment institutions, including services for migrant workers. These financial inclusion measures are already producing tangible results. Credit cooperatives perform an equally important financial inclusion function. They look forward to being given greater scope to serve universal social needs, overcoming their current challenges to fill gaps in the financial system. With the right support, Taiwan’s credit cooperatives can strengthen their foundations and move steadily into their second century. The author is an adviser to the National Federation of Credit Cooperatives, R.O.C.