Malaysian version of China’s Yu’ebao set for launch

Malaysian e-payments leader TNG Digital Sdn. Bhd. is one regulatory hurdle away from launching a local version of Yu'ebao, the cash management offering that opened an era of smartphone investing for Chinese consumers in May 2013.

Once the Securities Commission Malaysia grants its approval, hopefully by March, "we are ready to go," said Munirah Khairuddin, CEO of Malaysia with Kuala Lumpur-based Principal Asset Management Bhd.

Principal Global Investors and Kuala Lumpur-based financial conglomerate CIMB Group Holdings Bhd. own 60% and 40%, respectively, of Principal Asset Management. CIMB, in turn, holds a majority 51% stake in TNG Digital, whose e-payment services are actively used by roughly half of Malaysia's 31 million people for daily transactions, including tolls, taxis, parking, outside meals and retail purchases. Ant Group, the Hangzhou, China-based e-payments giant and parent of Yu'ebao, holds the remaining 49%.

TNG's cash management product — for which Principal Asset Management will be the sole manager — will offer its e-wallet customers the same combination of convenience and superior returns over bank deposits that made Yu'ebao an overnight sensation in China, with assets surging at one point to more than $260 billion.

Even after a number of interest rate cuts over the past year, money market yields of anywhere from 1.5% to more than 2% offer Malaysians far better returns on their spare cash than they're able to earn on current account balances, Ms. Munirah noted.

But Malaysia can't simply copy Ant's formula in China — which saw Yu'ebao quickly become a stand-alone cash cow even as Ant pushed ahead with longer-term plans to expand the range of financial products offered to its hundreds of millions of daily active users.

Since mid-2018, Yu'ebao money market fund assets managed by Ant's Tianhong Asset Management subsidiary have declined after Ant, responding to regulatory concerns, allowed third-party managers — 24 of them as of June — to offer money market funds under the Yu'ebao umbrella. Principal has a joint venture with China Construction Bank, and CCB-Principal is one of the 24 third-party managers of Yu'ebao assets.

As of June 30, Yu'ebao assets managed by Tianhong combined with assets in strategies overseen by third-party managers on Ant's digital platform came to 4.1 trillion yuan ($579 billion), up 36% from the year before, according to the prospectus Ant issued in October for an initial public offering that was subsequently aborted.

TNG Digital's 15 million active users make its Touch 'N Go app the e-wallet market leader in Malaysia, but with only 31 million Malaysians to China's population of 1.4 billion, the opportunity "can't just be about cash management — it has to be about other things" as well, Ms. Munirah said.

"We have to reinvent" the model, pursuing a "plethora of opportunities … to go deeper into other investment products," including retirement-related offerings, she said.

Pursuing those opportunities will demand a mix of haste and patience.

Haste because with the e-payments sector's low barriers to entry, being early with a strong proposition is the best way to keep ahead of competitors, Ms. Munirah said.

But the introduction of a broader range of financial products — a key to differentiating the offering as quickly as possible — has to be driven by the data TNG Digital garners from the daily purchases made by its millions of customers.

"If you've got e-wallet becoming a way of life, then investments should also be a way of life," Ms. Munirah said. "It's a matter of time before people switch their behavior to that — at least that's our vision," she said.

"We will need to grow with the e-wallet customers as we go along," looking into the data to understand what they are looking for, Ms. Munirah said. "Once we have better traction, and understand the data better, we'll be able to roll out more targeted strategies," she added.

TNG Digital's soon-to-be-launched cash management product will allow Principal Asset Management Bhd, which managed 68 billion ringgit ($16.8 billion) of AUM as of Dec. 31, 2020, to move beyond its current focus on Malaysia's mass affluent to the broader mass market, including millennials set to come into the rising middle-income category, Ms. Munirah said.

Growth in Southeast Asian countries is largely driven by their economies' small- and medium-size enterprises segment, much of it composed of informal sectors. With deep ties across Malaysia's merchant base, small- and medium-size enterprises base and the customer base as well, TNG Digital is well placed to serve the evolving financial needs of that mass market, she said.

Malaysia already has a number of digital investment platforms, including the i-Invest program launched in August 2019 by the Employees Provident Fund, the country's 941.8 billion ringgit, 14-million-participant, national defined contribution retirement plan, which allows participants to divert a of portion of their savings to approved unit trust funds.

But in contrast to those existing platforms, which have to be accessed through a sponsoring bank's website, "for this proposition, it's always in the palm of your hand and you use Touch 'N Go all the time … every single day," Ms. Munirah said.

"The growth curve will be different from China — we don't have the scale. We need to work harder on some of the other opportunities on investment — from pure investment products to retirement," Ms. Munirah said.

But if the goal is customer acquisition and retention, this initiative should provide ample opportunities to scale up over the long run, she said.