Payment Systems
CIFS (CBC Interbank Funds Transfer System) | Taiwan’s Real-time Gross Settlement (RTGS) system | - Owned and operated by the Central Bank of the Republic of China (Taiwan) (CBC).
- 82 bank participants, as well as other financial institutions.
- Processes high value and urgent TWD-denominated electronic funds transfers.
- Final settlement done for participants’ net balances originating from other domestic clearing houses.
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FISC (Financial Information Services Company) | Multi-purpose electronic funds transfer system with several subsystems (see below): | - Operated by the Financial Information Services Company, set up by the Ministry of Finance and various banks.
- Processes electronic interbank funds transfers (no value threshold). Effected through ATMs, IRS, online, mobile phones and bulk transfer systems.
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| IRS (Interbank Remittance System) | - Settled in real time for companies, banks and the government.
- Approx. 47 participants.
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| Credit Card and Shared ATM System | - Processes card transactions and 24-hour interbank withdrawals.
- Platform for enquiries, funds transfers and credit card cash advances.
- Credit card payments can be processed by FISC or National Credit Card Centre.
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| Foreign Currency Clearing Platform (FISC-FCCP) | - Processes USD, EUR, RMB and JPY-denominated transactions.
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| Bulk Payments System | - System for companies to make tax payments, file tax returns and allocate dividends or bonuses through magnetic tape or email bulk transfers.
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| FEDI (Financial Electronic Data Interchange) | - System for companies to make electronic transfers of funds and information online.
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| Shared Internet Banking System | - Online credit transfer system for selected types of payments.
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| FXML | - Platform for customers to initiate online bank transactions.
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| Internet Banking System | - Platform for customers to make online payments through payment cards.
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| Mobile Banking System | - Platform for customers to make payments and balance enquiries through mobile phones.
- FISC’s Mobile Banking Sharing Center links financial institutions and telecoms providers.
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TCH (Taiwan Clearing House) | Paper-based and cheque clearing system | - Managed by the CBC.
- Uses magnetic ink character recognition (MICR).
- Clearing houses in Hualien, Taitung and Penghu process payments manually.
- 94 financial institution participants.
- Final settlement done using participants' CBC accounts via CIFS.
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| ACH (Automated Clearing House) | - Operated by the TCH.
- Participants are financial institutions with CBC accounts.
- Processes credit and debit transfers.
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| eACH (Enhanced Automated Clearing House) | - Operated by the TCH.
- Participants are financial institutions with CBC accounts.
- Provide 24/7 real time, low-value payment and collection service.
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Payment Instruments
Credit Transfers
- Credit transfers can be done online and by phone.
- High-value and urgent interbank transfers are processed through CIFS within the same day.
- Low-value, non-urgent and high-volume credit transfers are processed through FISC (same day) and ACH systems (next day). These transactions include payroll, supplier and third-party payments.
- Some domestic Taiwan payments require traditional Chinese characters for some of the payment fields. This can create challenges for legacy enterprise resource planning (ERP) systems as well as for non-Chinese speaking staff.
- Recently, credit transfers have accounted for 88.1% and 9.4% of the value and number of all non-cash payments, respectively.
Direct Debits (auto debits)
- This mode of payment is used for low-value, regular payments such as utility bills.
- Direct debits are processed through FISC's Bulk Payment System (same day) or ACH (two working days).
- Direct debits accounted for 1.7% and 1.8% of the value and number of all non-cash payments in recent years, respectively.
Card Payments
- Credit, debit and stored-value cards are all in wide use in Taiwan, although mobile payments are increasing at a faster rate.
- Point-of-sale (POS) transactions are supported by the growing adoption of contactless payment facilities (accounting for 55% of all retail transactions), particularly on public transport and with large retailers.
- Visa, MasterCard and UnionPay are the main payment cards, with all cards being Europay, MasterCard and Visa (EMV)-compliant and are processed through FISC.
- Taiwan’s main prepaid, top-up payment card—the ubiquitous EasyCard—is now compatible with iPass and is used widely for transportation and retail shopping.
Online Payments
- The government is aiming to be a cashless society by 2025 and is providing the regulatory and technological environment as well as financial incentives to make this happen.
- There is a thriving e-commerce market in Taiwan with local and overseas online retailers. The most popular sites are Taobao/Tmall, Rakuten and Amazon.
- The TWD1.1 trillion e-commerce market is set to grow at a compound annual growth rate (CAGR) of 9.0% to a value of TWD1.5 trillion by 2024.
- Mobile payments have surged in Taiwan, driven by several factors: convenience, greater service availability, retail promotions, and the pandemic-related focus on contactless payments.
- Competition is fierce in the digital wallet ecosphere. LINE Pay is the current market leader, with Apple Pay and homegrown Jkopay not far behind.
Digital Currencies
- According to the Financial Regulatory Commission, the government has adopted a ‘neutral’ stance on cryptocurrency and continues to explore guidelines for the sector. Certain uses of cryptocurrency, such as trading, are not expressly illegal.
Cash, Cheques and Money Orders
- Cash has dropped in popularity, but still accounts for approximately one-third of low-value commercial and retail transactions.
- Cheques are a common form of cashless commercial payment, especially post-dated cheques, but usage is on the decline as credit transfers gain in popularity.
- Cheques are truncated before being processed through TCH.
- Paper cheques can take seven days to clear and foreign cheques up to 14 days, with final settlement being done through CIFS.
- Money orders are available in Taiwan through vendors such as Chunghwa Post, Western Union and MoneyGram. Money can be received or sent domestically or internationally, either online or in person.
Foreign Exchange (FX)
Taiwan is an offshore renminbi clearing centre. It has liberalised many of its foreign exchange controls, although some restrictions remain in place.
FX Landscape
- The official currency of Taiwan is the new Taiwan dollar (TWD). It is convertible domestically, but foreign exchange controls are in place for offshore transactions.
- Taiwan monetary policy is set and managed by the Central Bank of the Republic of China (CBC), which also sets interest rates.
- The exchange rate of the TWD is determined by market forces of supply and demand, however, the CBC will intervene to maintain an orderly market during periods of excessive volatility.
- Total net foreign-exchange trading volumes amounted to USD663.3 billion in April 2021, with an average daily turnover of USD34.9 billion.
- Taiwan has the fourth highest level of foreign exchange reserves in the world.
FX Management
- Resident companies can have onshore accounts denominated in TWD and a range of foreign currencies. Onshore foreign currency accounts are freely convertible and offshore units are allowed to hold foreign currency accounts.
- Non-resident companies may hold onshore foreign currency accounts, but they are not permitted to open a TWD cheque account.
- Resident companies can borrow in both TWD and foreign currencies. Non-resident companies must gain approval from the Foreign Exchange Department of the central bank and the Investment Commission of the Ministry of Economic Affairs (MOEA) to borrow from overseas.
- A number of products to help companies manage FX risk are available in Taiwan, including FX options, FX spot and FX forward, non-deliverable forward, and cross currency swap.
Exchange Controls
- There are no limitations on inward and outward remittances not involving exchange between New Taiwan dollars and foreign currency.
- Inward and outward remittances relating to foreign trade in goods, services, and direct investment and portfolio investments approved by the relevant authorities are also completely liberalised.
- Remittances involving exchange between TWD and foreign currency are subject to a USD50 million annual ceiling for companies, with prior CBC approval required for sums above this amount.
- A single remittance by a non-resident not exceeding USD100,000 may proceed directly through authorised banks. Amounts above this level require prior approval by the CBC.
- Foreign transactions involving TWD where the amount exceeds TWD500,000 must be reported. Foreign currency invoices are allowed but information on the exchange rate must be included.
Trade
Taiwan has an export-orientated economy. Its largest trading partners are China, the US, and Hong Kong, in terms of exports measured in US dollars.
Trading Landscape
- Taiwan joined the World Trade Organisation in 2002 under the name Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei).
- Taiwan and China signed the Economic Cooperation Framework Agreement (ECFA) in 2010, which has enabled Taiwan to export more than 500 products to China with virtually no tariffs.
- Taiwan has seven free trade zones, consisting of six seaports and one airport, which offer preferential tax rates compared with those outside of the free trade zones, such as the exemption from corporate income tax on the sale of goods if certain conditions are met, and exemptions from import and export regulations, customs requirements and other restrictions.
- Taiwan has a number of trade/business organisations, such as the Importers and Exporters Association of Taipei, which act as a bridge between the government and industry and offer market insights.
- Taiwan has anti-money laundering and combating the financing of terrorism laws in place. It also complies with United Nations sanctions against countries, such as North Korea.
Import Regulations
- Import permits and licences are generally not required. However, a number of products are on the ‘negative list’, meaning restrictions apply and a permit or licence may be needed. Items on the negative list include those with national defence, social stability, cultural protection, and environmental and ecological implications.
- Taiwan charges customs duties according to the Harmonized Commodity Description and Coding System of the Customs Cooperation Council.
- A commodity tax of between 8% and 30% is also levied on the import of certain commodities, such as rubber tyres, cement, oil and gas, and vehicles.
- A number of different import financing solutions are available, with options including letters of credit, inward bill collections, accounts receivables and import factoring.
- Trade credit insurance is available from a number of international and local insurance companies.
Export Regulations
- Export licences are not required for the majority of goods. Goods that may require an export licence include strategic high-tech items, and dual-use items and military goods.
- Goods supplied for export are zero-rated for VAT.
- There is a total ban on exports to North Korea, and separate lists of sensitive commodities for Iran, Iraq, Sudan and Syria. There are also restrictions on certain products being exported to China.
- Export credit and a range of export finance solutions are available in Taiwan, including letters of credit, export documentary collections, account receivables and export factoring.
Sources (Intro & Corporate Treasury)
World Economic Forum, IMF, UNCTAD, Financial Supervisory Commission, Central Bank of the Republic of China, PwC, KPMG, World Bank, CIA World Factbook, Trading Economies, the Government of the Republic of China, Statista
Sources (Banking & Payments)
Financial Supervisory Commission, Banking Bureau, Central Bank of the Republic of China (Taiwan), Taipei Times, Taiwan News, GlobalData, Kapronasia
Sources (Foreign Exchange)
Central Bank of the Republic of China, Bank for International Settlements, PwC, Trading Economics
Sources (Trade)
Ministry of Economic Affairs, Taiwan International Ports Corporation, WTO, PwC