Taiwan’s Mobile Payment Market in Transition

Mobile payments are steadily on the rise in Taiwan. Payments made using mobile phones accounted for 20% of all credit card payments in the first three quarters of 2021, an increase of 4.5 percentage points from the same period in 2020, according to data from the National Credit Card Center (NCCC). LINE Pay, the most popular contactless payment option in Taiwan, counted 9.8 million users in Taiwan in the first three quarters of 2021, registering over 146 million transactions with a total value of over NT$68.2 billion (US$2.45 billion), a growth of over 90% year-on-year.

COVID-19 has played a significant part in this trend, as people developed a preference for cash-free payments to reduce the risk of virus transmission. In 2021, a survey by the Market Intelligence & Consulting Institute in Taiwan reported that 44% of respondents had increased their mobile wallet use since the start of the pandemic. By mid-2021, a similar Mastercard survey indicated that over 75% of Taiwan consumers had increased their mobile payment usage, at least in part due to the surge in local cases last summer.

Cracking the QR code

Mobile payments are mainly performed using either QR code technology or near-field communication (NFC) technology, also known as tap payment. Although tap payment tools are simpler and more intuitive to use, QR code payment (required by LINE Pay and JkoPay, among others) dominates the market in Taiwan, accounting for 67.2% of contactless payments last year.

According to the NCCC, there are two reasons for this trend. Firstly, consumers on the island have developed a habit of scanning QR codes from using the government’s real-name registration system during the pandemic. Secondly, stores are more prone to adopt a QR code payment system since those devices are cheaper to install than ones that accept tap payment.

In response to feedback regarding the costs of installing hardware to use Apple Pay, Apple announced in early February that it would expand iPhone capabilities to accept contactless payments. Utilizing the phone’s existing NFC chip, merchants in the future will be able to conduct tap-to-pay transactions using only their iPhone. The feature will be available via an iOS software update on iPhone XS and later models this spring.

Similarly, Google and Samsung have unveiled Android phones and devices that will enable sellers to accept contactless payment without additional hardware. Last year, global payment technology provider Global Payments Inc. released its Global Payments Mobile Tap in Taiwan, allowing sellers to use NFC-enabled Android smartphones as portable handheld payment terminals.

Whether or not the updates come too late for the Taiwan market, which has already developed a strong preference for QR code payments, is yet to be determined.

Joining the ranks

Despite being a booming market for mobile payment, Taiwan has long lacked a central system that connects various banks and allows customers to transfer money using an online identification system and the receiver’s phone number.

These types of instant phone number-based money transfer services are not new and have become immensely popular in many countries. Kenya-based M-Pesa, which has been around since 2007, has about 49.7 million users in multiple countries, while Swedish Swish, which was launched in 2012, is used by nearly 80% of the country’s population. Meanwhile, to “venmo” is now used as a verb in the U.S.; it refers to transferring money through the popular mobile payment service of the same name.

In late 2021, Taiwan finally joined the long list of economies with mobile phone number-based money transaction services when a new system established by the partly government-funded Financial Information Service Co. (FISC) was launched to boost digital payment transactions. Under the new system, users can transfer money between various e-payment platforms and financial institutions without needing to set up several accounts, according to the Financial Supervisory Commission.

The mobile phone number-based transfer system ties users’ bank accounts to their phone number, enabling them to instantly transfer money to the receiver for a fee no higher than for a regular bank transfer. The service also has a “one-to-many” option, where a single phone number can be connected to multiple financial institution accounts. Users are additionally able to confirm the account name of the receiver before completing the transfer to avoid mistaken transfers and fraud. Currently, 30 domestic financial institutions have joined the system. To promote it to users, those who signed up before January 29 were offered digital red envelopes and could enter draws to win an Apple MacBook Air, Apple Watch, or up to NT$100,000 in cash. If widespread use of the mobile phone number transfer service is adopted, bank transfers in Taiwan could enter a new era of convenience and speed.