China is leading the world in mobile payments. The two biggest players, AliPay and WeChat Pay, have a combined total of over 700 million monthly users, and processed about US$3 trillion in payments in 2016.
Neighbouring Taiwan, on the other hand, is a little slow on the uptake. Mobile payments only accounted for 26% of total electronic payments in the country, according to the Financial Supervisory Commission.
Mobile payments are a key area of Taiwan’s digital nation plan, part of larger ambitions to move towards a cashless society. But how can the smaller Taiwanese players compete with China’s big boys?
“Something we are trying to do is to encourage a federation among these mobile payment companies,” Dr. Chiueh Tzi-Cker, Vice-President and General Director of the Industrial Technology Research Institute of Taiwan, says. “That’s one way to pull Taiwan out of this dilemma.”
Speaking to GovInsider on the sidelines of Taiwan Excellence 2017, Chiueh shares Taiwan’s plans for digitisation, artificial intelligence, and a cashless future.
The trick to going cashless
A federation could help local companies be more competitive, says Chiueh. For convenience, customers will be allowed to use any payments service at shops, much like how an ATM allows people to withdraw cash from various banks. “Even though I’m the user of one mobile payment scheme, I can go to other mobile payment companies’ merchants to use it too,” he explains.
For this to work, the government will be applying Blockchain technology to ensure that these mobile payment companies pay what they have collected on another company’s behalf. “Distributed database technology allows everybody to settle the score. I owe you how much, and I put it in the blockchain, it’s immutable,” Chiueh says.
ITRI currently has a prototype of this system, which it hopes to unveil by the end of this year, he adds.
Life in plastic
In this big push towards a cashless society, Taiwan is also looking at setting up a national credit card, Chiueh shares. He cites Korea as “leading the way” in this space.
ITRI is now helping a commercial company to set up a national credit card brand. After all, Chiueh points out, the infrastructure already exists, and a national credit card could offer lower fees. “As long as all these merchants are willing to accept this brand, then we don’t really need to pay Visa or Mastercard any money anymore,” he explains, adding that these two credit card giants collect up to NTD10 billion (~US$328 million) in fees from the Taiwanese people.
This laser focus on going cashless is for a few good reasons, according to Chiueh. “There is a universal belief among economists right now that cash not a particularly good thing,” he notes. Cash money is very expensive to print, and governments need to ensure that there are no counterfeits. “[Cash is] mainly used by criminals, really,” he remarks.
Chiueh goes on to say that “government actually wants cash transactions to be reduced down to under 20% after ten years”.
“The government wants cash transactions to be reduced down to under 20% after ten years.”
Taiwan’s digital nation plan
Besides plans to go cashless, Taiwan is working on collecting, digitising and analysing data from the government, environment and society. Taiwan sees typhoons and landslides every year, notes Chiueh, and data could help the government to reduce casualties and property loss. “We want to keep track, put in sensors to sense the environment and collect more data so that we can understand the environment a little bit better and manage it better,” he says.
Data can help in better traffic planning as well, “in terms of how to create more roads or build up the infrastructure to alleviate the pressure of congestion,” says Chiueh. The country also hopes that “the entire economic or financial infrastructure and society can be a little bit more advanced”.
Traditionally known as a semiconductor manufacturing leader in the region, Chiueh shares that the government now wants to move into sensors. Autonomous vehicles of the future will need a whole array of sensors to work, he explains, and while Taiwan cannot compete with Korea or China at manufacturing whole cars, it can build essential sensor systems. “We want to build this surrounding sensing subsystem that can sense 20 metres surrounding the car, whatever driving-related object,” Chiueh says. The country will also be exploring the use of autonomous shuttle buses over the next five years, he adds.
While China is monopolising the mobile payments space, it seems that Taiwan could soon stand on its own.