Taiwan’s E.Sun Commercial Bank, named after the island’s highest peak Yushan, is seeking new growth drivers in the rapidly growing markets of Southeast Asia as part of its strategy to become a regional bank less than three decades since it was founded.
Having set up its first branch in the southern province of Dong Nai in September, Vietnam is E.Sun Commercial Bank’s latest destination. Before that, it opened up in 2012 in Singapore and established a subsidiary in Cambodia in 2013.
E.Sun Commercial Bank, established in 1992, is also one of the lenders to have won a banking licence in Myanmar, as the government attempts to draw foreign investment into the emerging economy.
“We are looking to build up our Asean presence in order to capture the skyrocketing demand for banking, financial-related services as these economies grow,” Joseph Huang, president of E.Sun Commercial Bank and president and chief strategy office of parent company E.Sun Financial Holding, told FinanceAsia in an exclusive interview.
Due to lower operational and labour costs, many Taiwanese businesses have set up their production lines in Asean nations – a trend E. Sun Commercial Bank hopes to benefit from.
“We are seeing an increasing trend of Taiwanese operations in these countries and [the presence of a Taiwan-based bank] will facilitate them in terms of business financing and advisory as well as payment and remittance services,” Huang told FinanceAsia.
Cambodia has been E.Sun’s key focus since acquiring a controlling 75% stake in Phnom Penh-based Union Commercial Bank three years ago. Since then it has opened another six branches on top of the five acquired from UCB, and is scheduled to open another three to four branches by the end of the year, according to Huang.
In the last three years, the scale of the E.Sun’s Cambodia business has nearly doubled in terms of deposits, lending, and profitability, Huang said.
Betting on tech
China too features in E.Sun’s regional expansion plans.
The lender currently operates in four business locations: Qianhai, Shenzhen, Dongguan, and Changan. Due to their proximity to Taiwan, the initial plan is to expand in China’s southeastern coastal cities, not least Shenzhen, which fits into the bank’s growing bet on financial technology, given the city’s growing reputation as a technological hub.
“Shenzhen is considered one of the best innovative cities in China. Many technology-related companies like Tencent, Huawei, and BYD have their headquarters there and that provides a lot of opportunity for our fintech business,” Huang said.
“The partnership with Alipay was originated from a simple idea that allows mainland Chinese buyers to purchase goods from Taiwanese manufacturers online,” Huang told FinanceAsia. “That facilitates both parties and increases business because the buyer can pay in renminbi while the vendor can get Taiwan dollars. The currency exchange, clearing, and settlement procedures are handled by us.”E.Sun is the first Taiwanese bank to be granted an e-payment licence and in 2012 teamed up with Chinese e-payment giant Alipay to develop a cross-border payment system.
Initially the cross-border e-payment services were designed as one-way sales of Taiwanese goods to Chinese buyers, but it has now been expanded to allow Taiwanese buyers to purchase goods from Chinese merchants that support Alipay.
Two years after clinching the partnership with Alipay, E.Sun sealed another collaboration agreement with Paypal that expanded its e-payment services to all of the 193 markets supported by the US company.
E.Sun has also been integrating new technologies into its daily operations in response to the challenges posed by the rise of fintech companies, which have disrupted the way traditional banks operate.
“For banks we will have to think about improving our services through the integration of offline and online businesses,” Huang told FinanceAsia.
One example is the ability to collect and integrate client information through internet and mobile banking.
“The key will be how we apply the information collected from the online platforms, turn them into useful advice and provide a user-friendly experience when these clients visit our branches,” Huang said. “[Fintech companies] have taken a slice of the retail banking business but banks still possess the competitive advantage because our branches allow face-to-face meetings with clients.”
As such, he believes fintech companies will continue to lag behind traditional banks in terms of value-added services such as investment advice, financial consultation, and trust and estate services.
In corporate banking too, fintech companies are unlikely to supplant the role of banks role because of the complexity of corporate transactions, Huang said. For example, peer-to-peer lending and crowdfunding platforms are unable to process collaterals or provide add-on services such as corporate strategic planning advices.