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December 19, 2018

Taiwan: POS penetration is poor despite a dense urban environment

By Briony Richter

Cash remains the preferred method of payment in Taiwan, accounting for more than three-quarters of the total payment transaction volume.

Consumers in Taiwan have a strong inclination towards cash for day-to-day transactions, despite the gradual rise in electronic payments.

However, the government of Taiwan has been promoting electronic payments through various initiatives such as the Act Governing Electronic Payments Institutions.

This, coupled with increased merchant acceptance, resulted in card payments recording a CAGR of 7.5% in terms of transaction value between 2014 and 2018. While debit cards dominate in terms of overall transaction value, use of these cards is largely limited to ATM cash withdrawals.

Credit cards are preferred for card payments, accounting for three-quarters of the total value. Gradual adoption of contactless technology and growth in e-commerce payments are expected to further drive the overall payment card market over the next five years.

Credit cards favoured

Taiwanese consumers are more likely to use credit cards than debit cards when making payments.

A key driver behind this preference is the benefits linked to credit cards. In a fragmented payment market such as the Taiwan card industry market, consumers become very demanding.

This means banks and issuers have to go to increasing lengths to attract new customers, particularly for lending products such as credit cards. As a result, there are a number of reward programmes and special offers attached to credit cards in the country.

E-commerce growth

Taiwan’s e-commerce market is one of the fastest growing in Southeast Asia. It is driven by high internet and smartphone penetration, rising adoption among the younger population, and growing confidence among consumers.

The e-commerce market is acting as a driver for electronic payment market growth, with the availability of various payment options, including debit and credit cards. Meanwhile, the emergence of alternative payment methods will further drive e commerce payments for the foreseeable future.

Mobile payments

The government intends to increase the percentage of mobile phone users who make mobile payments from 13% in 2018 to 90% by 2025.

In January 2018, the government announced plans to subsidise transaction fees for in-store payments made through mobile phones, and to provide discounts to consumers who pay utility bills via mobile.

The government also plans to allow small businesses to continue paying business tax of 1% even if they expand their operations, as long as they provide options to pay by mobile phone.

Low cost POS terminals

The level of penetration for the POS infrastructure in Taiwan is low. This is largely a result of the dense urban environment, with many small-scale merchants competing for very low profit margins. Many of these retailers do not accept cards because they want to avoid the associated fees.

In addition, rising adoption of QR codebased payments in Taiwan is limiting the installation of POS terminals, the volume of which recorded a CAGR of just 1.1% between 2014 and 2018. To overcome this, banks are offering mPOS terminals at lower costs than traditional POS terminals. These solutions are primarily offered to street vendors and SMEs, and have led to a rise in adoption of mPOS.

Prepaid cards

EasyCard is the most popular multipurpose stored-value card available in Taiwan.

Offered by EasyCard Corporation, it can be used to pay for subway, bus and taxi fares, as well as fees at designated car parks, stores, government facilities, hospitals and tourist locations. EasyCard can also be used to make online and retail purchases, and due to its multi-use functionality, the card is popular in Taiwan for daily necessities.

Gift cards are popular for occasions such as birthdays, weddings, graduations, and anniversaries.

 

 

 

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