The introduction of an online fund supermarket in Taiwan could shake up the country’s funds industry, but local banks – concerned about a rise in competition – are trying to prevent it taking off.
In order to overcome such opposition, industry players and the regulator could do with looking just across the Taiwan Strait to China for some tips on how to make it work.
The platform is set to go live next month, as noted yesterday, in the first of two articles on the subject, the first of which ran on Friday. And, unlike a similar initiative that attracted little demand in Korea, Taiwan’s system is believed to employ sophisticated 'big data' technology to analyse users.
But the prospect of a unified platform, through which investors can buy funds, is seen to be worrying local banks. Several are believed to be trying to thwart the move, with some even threatening to remove asset managers from their distribution shelves if they make products available via the platform, a senior executive from a local fund house told AsianInvestor.
There’s another obstacle to the development of the supermarket. Investors in Taiwan still need to submit physical documents, such as identity verification, to authenticate their online accounts. There is little difference in the process whether it’s for a bank account or a fund house website.
The process is necessary, given the increasingly stringent requirements of money-laundering laws and know-your-customer measures, said Rosemary Wang Yung-Hsin, deputy director-general of the securities and futures bureau of Taiwan's Financial Supervisory Commission. However, it’s a practical impediment.
These issues are not simple to fix. China offers the most obvious example of success, but conditions are somewhat different there. “Chinese investors are incredibly tech-savvy and readily adopt new ideas,” said Ivan Han, senior analyst at research firm Cerulli Associates. Moreover, the country’s surge in online products has been driven by inflows into China’s money-market funds.
In June 2013 China’s Alibaba Group launched Yu'EBao, a product thata automatically invests into the Tianhong Zenglibao Money Management Fund. At that time Tianhong Asset Management was China’s 50th largest asset manager; today it’s easily the largest, thanks to Yu'Ebao. It reported assets under management of Rmb1.07 trillion ($161.6 billion) at the end of 2015.
Taiwan and other countries can learn some lessons from China’s success. For a start, they could introduce operational and regulatory allowances for third-party payment platforms that facilitate online transactions. That would allow investorsmore easily to take funds out of their bank accounts and invest it elsewhere.
Making it easier to sign up for online accounts is vital, too. Encouragingly, Taiwan’s regulator has plans to simplify the process. The FSC’s Wang told AsianInvestor that at some point investors would be able to open online accounts with their citizen digital certificate, a form of online identification used to access government services.
Combined with better local independent financial advisers and the rise of robo-advisers, such measures could help see Taiwan's online supermarket plans attract a large customer base. That might not be welcomed by local distributors, but it would be good news for the country's end-investors.