Taiwan has a fairly well developed financial industry. This small island has a population of only 24 million in total, but has access to more than 5,000 physical financial institutions. Customers, therefore, are able to enjoy all the banking services provided with ease. Plus, the interest rates on loans in Taiwan are extremely low with only 2.63% APR. The application for a fiduciary loan becomes relatively easy for office workers. Thus, FinTech derivatives such as P2P lending are not previously widely considered.
However, for start-up companies, SME owners, or those who are not target clients of banks, obtaining a loan can be comparatively difficult. Banks will either reject the applications directly due to a lack of financial history, or set high thresholds for quota, interest rate and repayment of the loan. As a result, many of these so-called minorities turn to P2P lending for funding.
P2P firms need to behave within regulations
Compared to many other regions, P2P lending started off relatively late in Taiwan. This was mainly because of the existing regulations on the financial services. Currently, there are only 10 peer-to-peer lending companies in Taiwan. Among those, LnB, short for Lend and Borrow, is considered to be the largest online P2P lending platform.
Founded around the end of 2015, LnB, is one of Taiwan’s most successful FinTech startups operated by Robo Web Technology Co. Since its launch, LnB has collected over 38,000 clients and approved NT$5.2 billion (US$173.33 million) in loan, which is 0.8% of the total amount of Taiwan’s fiduciary loans according to Taiwan’s Joint Credit Information Center (JCIC).
As the only FinTech startup in Taiwan invested by the venture capital, LnB has raised millions of US dollars from Acorn Campus Ventures in its Series-A funding. It aims to provide a platform with fair trade and transaction transparency. The founder of LnB, Joanna Yang, states that LnB is just an intermediary without funds involved. Thus, LnB is able to dodge the bottom line of Taiwan’s Financial Supervisory Commission (FSC)’s regulation on non-banking businesses which will enable it to implement the fair trade.
Furthermore, LnB set up a criterion for ranking from highest to lowest, A+ to S3, the borrowers based on their credit reports provided by JCIC. The results of this would then be compared to Taiwan’s overall lending environment. “The main reason that P2P lending business didn’t go well in China is credit.” said Joanna Yang. She pointed out that most of the Chinese people lack the concept of credit because of the skip of credit-card-use. The corporations are unable to accredit the borrowers therefore, the fraud constantly happened in China. Taking this as a warning, the setup of the grading criteria guarantees the rights of both lenders and borrowers to prevent the provision of bad debt.
Position P2P as partners of financial institutions
Taiwanese government has been promoting the development of FinTech orally for years since 2014. However, the passivity of the government has always been criticized. Instead of encouraging the development, government authorities tend to act as regulators. They hope the startups will cooperate with financial institutions to lower the risk of poor operation and are always overseeing to ensure that the startup’s do not break the laws. This greatly hinders the growth of FinTech in Taiwan.
After years of negotiation, in 2018, LnB became the first P2P lending operator partnering with Standard Chartered Bank Taiwan Ltd, which was considered to be a breakthrough for LnB by the founder Joanna. With the cooperation, LnB will pass details of interested borrowers to Standard Chartered. The loan requests would be settled within 24 hours. The effectiveness would bring a huge growth for LnB’s business. The partnership is also beneficial to the Standard Chartered who would have access to younger targets from LnB’s clients list, this in turn creates a win-win situation for both LnB and Standard Chartered Bank Taiwan Ltd.
The Future of Taiwan’s P2P Market
LnB is one of the most successful startup companies in Taiwan. Through a cooperation with Standard Chartered, LnB has marked the start of the competition in Taiwan’s P2P lending market. If LnB can steady itself and continue to build up the trust with its customers, it may soon become a dominant power in Taiwan’s P2P lending market.
Adding on to that, the case of LnB and Standard Chartered also hints that Taiwanese government is drawing more attention to FinTech. Though the timing is a bit off, the business seems to have finally been on course. Taiwanese government should be more open to the market. Only without the hands-on regulations by the government, Taiwan can create an environment that benefit P2P business, making it a useful supplement to financial industry.