Will Taiwan's banks stay stuck in a '1980s' time warp?

Two years ago, Catherine Chou walked into a Taiwanese bank for the first time.

The Taiwanese American professor relocated to Taipei to wait out the end of Covid-19, but she was still processing paperwork and needed to send a money order.

Sending money back home in the US is a relatively simple process that requires a photo-ID, a simple form, and payment in cash or a debit card.

The process in Taiwan required a lot more work.

I filled out the paperwork by hand, and it was input into a computer by the bank clerks. The dot printers are in the background.

It was a very slow 1980s vibe. The afternoon fruit delivery came in, everyone passed around the boxes, and I was still waiting for my money order to go through.

When foreigners and foreign-born Taiwanese first meet Taiwan's banking industry for the first time, they are often described as Painstakingly slow, overly bureaucratic, and often edging into darkly comical.

Taiwan is synonymous with sophisticated high-tech companies like TSMC and Foxconn who supply many of the parts essential to smartphones and computers. It is home to a growing market for cryptocurrencies.

Taiwan is the leader in gender equality and the first place to legalise same sex marriage in Asia.

On the ground in Taiwan, things can feel more old-fashioned.

The institutions can feel like a world of their own, with pass books, pneumatic tubes, endless paperwork, and a traditional stamp.

Taiwan's banking industry is very traditional. Sharon Hsu, a financial consultant at Enlighten Law Group in Taipei, says that it is more rigid than other industries.

The first private banks were allowed to open in 1989 after a major banking reform.

Taiwan has 40 local banks, as well as branches of international banks like HSBC and Citibank, according to the Taiwan Academy of Banking and Finance.

Taiwan has a population of 23.5 million and is often described as overbanked.

Many banking services still need to be done in person and banks are slow to adopt new practices unless the government makes it clear that they are allowed.

Taiwan's banks decline to adopt new services when they are deemed legal.

The stagnation may be due to the fact that most local customers are happy with how things are already run, even if it means standing in line with a passbook.

The small and medium enterprises that dominate Taiwan's economy are easily met by banks.

The Pandemic has made retail customers reconsider online banking and banking apps.

Digital deposit accounts numbered just 3.83 million at the end of the year, but will reach 10.47 million by the end of 2021, according to government data.

Three online-only banks were approved by Taiwanese regulators. They can only offer simple services like savings and loans, which is the beginning of their potential, according to Kunchou Tsai, a lawyer at Enlighten Law Group.

Many Taiwanese people have met their financial needs outside of the bank, which is one reason for the delay.

Many people rely on apps like LINE Pay, which connects their social media account to their bank account, while bills can be easily paid offline at convenience stores or the post office.

Even as customers embrace online banking portals, banks are still behind their competitors as companies like 7-Eleven and Familymart expand into digital payments, according to Amy Fang, deputy director of the Overseas Business Institute at TABF.

Banks are struggling to catch up.

Convenience stores want to branch into digital payments and they want to build their own ecosystems for online shopping market, so it's really important now that our local banks review their strategy

Taiwan's big plans to become a more attractive global destination include attracting 100,000 foreign workers and making English a widely spoken language.

For individuals and entrepreneurs, getting a foot in the door can be a challenge, even for large multinational companies.

Americans who are unpopular due to the hassle of IRS paperwork can be turned away from opening an account.

If you open an account after dealing with a lot of paperwork, you may be startled to find other restrictions such as being called in to sign for overseas transfers.

The European Chamber of Commerce and Taiwan's Gold Card office, which oversees a special visa program to help entrepreneurs and qualified professionals move to Taiwan, have weighed in.

Finance is a key sector for attracting international talent, but a lot of time the first thing they encounter is that Taiwan is such an awesome place until the first time they go into a bank.

Taiwan's government has been working to address some of these issues, but there are still some hurdles that need to be overcome, according to Thomas McGowan, a long-term resident of Taiwan and partner at the Taipei office of the international law firm, Russin & Vecchi.

Since the Panama Papers fines, Taiwan has tightened up its anti-money laundering rules. The foreign exchange controls can make receiving and sending money abroad more difficult than in other places.

In other cases, banks are reacting to foreigners as banks everywhere react to someone from abroad.