Taiwan’s three main digital banks, LINE Bank, Next Commercial Bank, and Rakuten Bank, continue to post losses despite growing customer bases in 2025. Experts question if these online lenders can achieve long-term sustainability amid tough competition and high costs.
Rising Losses Amid Growth
Taiwan’s digital banking sector has expanded quickly since the first pure-play banks launched in 2021. By mid-2025, these banks have attracted over five million customers combined, offering easy online services like loans and deposits without physical branches.
Yet, financial results show ongoing struggles. In the first half of 2025, the three banks reported combined losses of NT$8.5 billion, up 31 percent from the previous year. This marks a record high, even as they push for more users through apps and promotions.
Analysts point to heavy startup costs as a key issue. Building secure tech systems and marketing to new customers eats into revenues. Traditional banks, with their established networks, hold a strong edge in this crowded market.
Key Challenges in a Saturated Market
Taiwan’s banking landscape is one of the most competitive in Asia, with nearly 40 retail banks serving just 23.5 million people. The population is shrinking slowly, which limits growth for newcomers.
Digital banks face unique hurdles. They lack the branch networks that build trust with older customers. Plus, regulations in Taiwan have been slow to adapt, restricting some services like corporate lending until recently.
Here are some main challenges these banks encounter:
- High customer acquisition costs due to aggressive marketing in a mature market.
- Limited revenue streams, mainly from personal loans and investments, without diverse products.
- Dependence on parent companies for funding, as profits remain elusive.
- Competition from tech-savvy traditional banks that now offer digital options.
Experts say economies of scale are hard to reach when the market is already full. Consolidation among banks is rare, as family-owned firms prefer to stay independent.
This setup forces digital banks to innovate fast or risk falling behind. Some have started adding foreign exchange and mutual fund services to boost income.
Financial Performance Breakdown
To understand the situation better, let’s look at recent data. All three digital banks narrowed losses slightly in 2024 compared to earlier years, thanks to better interest income. But 2025 shows mixed results.
The following table summarizes key financial metrics for the first half of 2025:
| Bank | Customers (Millions) | Losses (NT$ Billion) | Main Revenue Source |
|---|---|---|---|
| LINE Bank | 3.2 | 3.8 | Personal loans |
| Next Commercial Bank | 1.5 | 2.9 | Investments and deposits |
| Rakuten Bank | 0.8 | 1.8 | E-commerce integrations |
These figures highlight how LINE Bank leads in user numbers, backed by its popular messaging app. Next Commercial Bank focuses on telecom ties for growth. Rakuten Bank leverages its e-commerce roots but trails in scale.
Overall, pre-tax losses improved for some due to regulatory changes allowing more business lines. Yet, full profitability might take years, with forecasts varying from 2026 to 2028.
Strategies for Sustainability
Digital banks are adapting to survive. Many now prioritize AI and big data to personalize services and cut costs. For instance, they use apps to offer quick loans and wealth management tools.
Regional expansion is another focus. Banks eye Southeast Asia for new markets, where digital banking is booming. Sustainability efforts, like green lending, align with global trends and attract eco-conscious customers.
Partnerships help too. Collaborations with fintech firms bring innovative products without huge investments. Traditional banks in Taiwan also push digital transformation, but pure online models aim for agility.
One positive sign is the growing affluent population in Taiwan, expected to top three million by late 2025. Targeting high-net-worth clients could drive profits through premium services.
Future Outlook and Expert Views
Looking ahead, ratings agencies like Fitch predict ongoing reliance on shareholders. They note that losses should decline further, but sustainable profits depend on market shifts.
Some experts remain optimistic. They argue that as digital habits grow, especially among younger users, these banks could dominate. Others warn that without major changes, like mergers, the sector might stay unprofitable.
Taiwan’s government supports innovation through pilots, such as digital asset custody starting in 2025. This could open new revenue paths for banks.
In a broader context, similar challenges hit digital banks in Hong Kong and Thailand. Hong Kong’s virtual lenders narrowed losses in 2025, offering lessons for Taiwan.
What do you think about the future of digital banking in Taiwan? Share your thoughts in the comments and pass this article along to spark discussions.
