Next Commercial Bank, a Taiwanese digital bank, has partnered with Temenos to develop its retail and corporate banking offering set to launch later in 2020.
The start-up, which is led by the country’s largest telecom operator Chunghwa Telecom, was one of three to land its virtual bank licence from the island’s Financial Supervisory Commission (FSC) last July.
“As one of the first neobanks in Taiwan, we have a unique opportunity to raise the bar for banking in our region,” says Next Bank’s CIO
The FSC says each start-up has a different business model and will be targeting different customers. Next Bank will roll out customer accounts, deposits and loans upon launch, with plans to provide mortgages and wealth management later down the line.
Chunghwa Telecom owns a 41.9% stake in Next Bank, whilst Mega Financial Holding owns a 25.1% stake, meaning the start-up will launch with roughly $332 million in capital. It hopes to reach one million customers in the first three years.
The cloud-based core banking solution Temenos Transact will underpin the bank’s entire operations. Its pre-integrated compliance modules also mean the bank will be covered under the country’s Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) which tackle tax evasion.
Of the Swiss technology provider’s more than 3,000 bank clients, 460 of these span 26 countries across Asia. Recently, the firm signed deals with Norwegian state housing bank Husbanken, Swiss banking group Banco Itaú International, and Dominican bank BHD Leon, promising to keep all of their cost-income ratios at 26.8%, half the industry average.
“As one of the first neobanks in Taiwan, we have a unique opportunity to raise the bar for banking in our region,” says Next Bank’s chief information officer Wang Tun Chou in a statement.
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The FSC has licenced a handful of neobanks in the country
Facing competition from virtual banks not only in Taiwan, but also in Hong Kong and Singapore, incumbents such as HSBC and Citi have been under new pressure to offer up sturdy competition.
With 65% of HSBC’s total pre-tax profits coming from Asia last year, and with Citi’s digital brokerage and mutual fund transactions jumping more than 70% in March this year since January in Asia, both incumbents have a lot to lose if these virtual banks take up significant market shares.
“We’re likely to see these new players in Taiwan focusing on specific markets in need of specialised services and products,” Accenture’s banking practice lead in Asia Pacific and Africa, Fergus Gordon, told Reuters last year following the licence announcements.
He predicts microloans, 24-hour availability, small and medium-sized enterprise (SME) banking and faster credit approvals will all be likely targets for Taiwan’s upstart virtual banks.
As well as Next Bank, the FSC has also licensed LINE Financial Taiwan, led by Japanese messaging app LINE Group, which also operates in Thailand, Indonesia and Taiwan. Alongside LINE Group, the bank is backed by Taipei Fubon Commercial Bank, CTBC Bank, Standard Chartered, Union Bank of Taiwan, and Taiwan telecom operator FarEastTone.
The third virtual bank to land a licence last year was Rakuten International Commercial Bank, which is led by Taiwanese IBF Financial Holdings and Japanese ecommerce firm Rakuten.
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