Japan’s top internet-only bank seeks to scale Taiwan’s banking industry

Rakuten International Commercial Bank leverages its parent’s 20 years’ experience in Japan and its extensive global network of companies and partners.

Unlike many of the region’s new neobanks, Taiwan’s first digital-only bank to launch, Rakuten International Commercial Bank has a strong ace up their sleeve: their parent company has been running a successful digital-only bank in Japan for over 20 years.

“Our strong point is that we know what we should do thanks to our 20 years of banking experience, and at the same time we also know what we should not do,” Kazuhiko Saiki, CEO of Rakuten International Commercial Bank in Taiwan, told Asian Banking & Finance in an interview. “In Japan, Rakuten Bank is one of the biggest internet-only banks. We have more than 10 million customers, and we are already making a lot of profit.”

Saiki was there during the beginnings of Rakuten Bank. He left a successful career in business, advertising and marketing that took him all the way to Singapore at the behest of a friend, who wanted to start an internet-only bank at a time when such a thing was still a novelty in Asia.

As a result, it could even be said that he has one the longest internet-only banking careers in the world, Saiki remarked.

But whilst they plan to use their past experience to guide them in this new venture, Saiki noted that they will still ensure that services are localized based on the needs of Taiwan customers.

Another ace up their sleeve is Rakuten’s extensive network of companies within the group as well as partners. Customers can expect to enjoy an ecosystem where they can enjoy rewards and other services from their ecommerce platform in the future.

What are Rakuten’s reasons for launching a digital-only bank in the Taiwan market?
The government decided to offer two licenses for internet-only banks. This is a very historical moment, as this is also the first time in about 28 years that new banks will launch in Taiwan.

Whilst Rakuten is doing business all over the world, Taiwan offers one of the biggest potentialities to enhance our business. In the year of 2008, Rakuten e-commerce started here in Taiwan, followed by the launch of Rakuten Car in 2014, followed by another business unit, our e-book business. After Japan, Taiwan offers one the biggest opportunities as it already has one of the biggest Rakuten ecosystems existing, compared with other countries.

So we have two reasons for launching a bank here: first, the Taiwanese government offered new banking licenses. At the same time, Taiwan already has one of the biggest Rakuten Broxton ecosystems existing amongst countries all over the world. Using this ecosystem, we believe that it is easier for us to enhance our business in the market. That is why we focused on the Taiwan market and why we applied for a [banking] license from the government.

What is Rakuten Commercial Bank’s edge over other banks in Taiwan?
Again, Rakuten International Commercial Bank is purely an internet-only bank. Here in Taiwan, the banking market is very mature and at the same time, the IT industry is also very mature. [Because of this] many people think that it's easy to combine these two things and launch an internet-only bank.

But from our 20 years experience in Japan, we know that it is not easy. If you take a look at all over the world there are only a few profitable internet-only banks. Because just combining the banking business and IT business doesn't automatically make a successful bank.

In Japan, Rakuten Bank is one of the biggest [internet-only banks]. We have more than 10 million customers, and we are making a lot of profit. So what we will do here in Taiwan is similar to what we did in Japan. This means that we should know the nature of an internet-only bank, how to operate it, how to manage it.

What we want to do here is to follow the proper way: focusing on the core business of the bank, which are deposits, loans, and the remittance service or the payment service.

So what we do is combine our deposit function with a payment service and a loan service. That is what we have been doing in Japan, and we have been successful there. That's one point that we want to enhance here in Taiwan.

How do Rakuten International Commercial Bank and other internet-only banks have to offer to Taiwan’s banking industry?  
Many financial industry people have asked me, "what is the difference between an internet-only bank and the internet banking service of a traditional bank?" As an example, to explain, let's compare the banking industry to the pizza industry. A pizza is originally served in the Italian restaurant. But during the 1960s, there is another industry that became popular, which is delivery-only pizza.

Comparing a pizza from a delivery-only franchise and a delivery pizza by a traditional Italian restaurant, let's not talk about which is delicious or what is inside, because those are different. Rather, let's consider their ordering system.

If you order a pizza to be delivered from the Italian restaurant, it will take hours for you to be able to eat. But for the delivery-only pizza store, it will have a central office or system that will receive every order, which will then divide these orders amongst their branches that are nearest to the customer. For the pizza you ordered from the delivery-only franchise, you'll be able to eat at a more immediate time.

Maybe even the menu itself is different; for the delivery pizza, they offer the half and half or maybe the quarters, or maybe they have an offer with salad or coke or something like that. So, even the product itself is different.

How does the pizza scenario connect to internet-only banks and traditional banks? Similar to the pizza industry, there are many ways to offer financial services and products to banking customers. If you, a customer, want to use internet banking services, you can still enjoy the internet services offered by a traditional bank and at the same time, you can enjoy services offered by internet-only banks.

But while many people think that these two are the same actually, behind-the-scenes, the system or structure of the company is different. For example, the cost structure of the employees and staff are completely different. The management's point of views are also completely different. So that is what we are offering here in Taiwan: a completely different banking point of view and experience.

What will be the role played by internet-only banks in transforming the industry?
And as Taiwanese government has said, they wanted to give the licenses for the internet-only banks so that we could become the catfish. That is what they are saying: catfish effect. They are saying that we have to become the stimuli for traditional banks to enhance or to develop their digital or internet banking capabilities, and not just banks but also the whole financial or banking industry.

For our part, we just have to do what we should do, we just follow what customers want, we just offer them the conveniences of internet banking: remote banking services that are safe, that are very secure, and are overall convenient to the customers.

Tell us more about your products. What are some unique services that you offer?
We are offering an ATM card, which is connected to international branded ATM services, and with which you can use to withdraw or deposit money through every ATM machine here in Taiwan. If you go abroad, you can also withdraw money in the local currency of that country.

Remittance wise, you can send the money using your mobile phone, via the internet, or  ATM machines. And also, this is not clearly disclosed yet, but we are starting QR payment services. We recently partnered with a very big remittance rating company here in Taiwan.

Can you give us an estimate of when you believe you will start making a profit?
We always say that we will likely start making a profit by the third year.

How has Rakuten Commercial Bank Taiwan been received by the public so far?
Many customers applied for an account, so our operation side had a lot to handle. We currently cannot disclose the number of accounts. Please wait for it will be made public by the financial regulator in Taiwan at the end of every three month. I can tell you, however, that the acceptance in the very first stage was very good.

Product-wise, the deposit amount per account at the first stage is higher than I expected. Of course, we have to grow more, but we expected that it would take time, but actually the result is very good.