Taiwan's banks must embrace FinTech

Automated FinTech solutions the answer to ESG reporting obligations

TAIPEI (Taiwan News) — Banks often get their basic Know Your Customer (KYC) obligations wrong, even without incorporating ESG reports.

Sometimes it is human failure to ensure all the necessary documents are obtained and maintained and this is caused by lack of oversight or even a lack of resources. One of the most common problems is keeping up with the ongoing reviews of existing customers based on their risk ratings.

High risk customers should be reviewed every 12 months, medium risk every three years, and low risk every five years. When you add the complexity of ESG reports into the review process, I become concerned about how banks will manage the process.

Taiwan's banks rely on "back office" staff, but can they sustain or enlarge their workforces? Factors such as an aging workforce and a younger generation of bank employees should be considered.

How should Taiwanese banks overcome the operational burden of ESG reports? We must look at FinTech solutions to find a third party system that will reduce the burden and meet regulatory expectations. Some banks may create their own proprietary FinTech solutions, but they are often extremely costly and never properly maintained.

These are the "bare bones" of an ESG related FinTech solution. Taiwan's banks should seek to avoid the following:

• A solution that fits their scale of operations but can be upscaled as per requirements

• Ensure the solution contains data that meets globally recognized frameworks such as UN Sustainable Development Goals

• There must be clear insight into the customer's business activity, risk assessment, regulatory compliance, geopolitical risk, due diligence and supply chain.

• Be careful of any solution that relies solely on a questionnaire format, as this format has proven to be susceptible to greenwashing

• Look for scoring based on fact rather than some corporate narrative

• A solution that updates its scores regularly and avoids out-of-date data

• Find a solution that covers all customers and remember there will also need to be a map of the customer supply chain

• The solution should provide an automated ESG score mapped to Taiwan's regulatory framework

• With an automated assessment, the bank can focus its resources on customers with areas of concern and make best use of the bank's resources

• If possible, find a solution provider that will allow the bank to give rated customers access to their ESG scoring tool

• Access to the scoring tool allows customers to support their ESG rating growth, making them more attractive to investors and providing even cheaper access to financing

Put simply, FinTech has the ability to provide efficient ESG reporting solutions. The future should see ESG scores and data points provided to retail bank customers, giving them the ability to make informed, sustainable lifestyle decisions. A future to look forward to.