A Principal Component Analysis of Digital Banking Development in Taiwan

Abstract In Taiwan, the digitalization of banks has imparted a future trend and a national financial technology (FinTech) policy. This paper aims to study which factors will affect the promotion of digital banking amongst digital accounts. Categorically, we applied the principal components analysis (PCA) method to analyze and identify the main factors of digital banking development. In addition, this study used three years of data from 2017 to 2020 since the data were relatively comprehensive and included all the large financial holding companies (15 in total) in Taiwan. The empirical findings can briefly be summarized as follows: a bank that wants to promote digital accounts must start with a credit card since that is what digital finance must be bound to. They also need to let people know that digital accounts have many advantages, such as no deposit limits or interest-free cross-bank withdrawals. There are a few crucial factors that need to be considered, including the number of free transfers, the card in force, active cards, and the number of free withdrawals. If banks effectively promote and attract people to apply for digital accounts, it could strongly contribute to the development of digital banking in Taiwan. JEL classification numbers: C45, G10. Keywords: Financial technology, Digital banking, Digital account, Principal components analysis.