This article first appeared in The Edge Malaysia Weekly on November 11, 2024 - November 17, 2024

TNG Digital Sdn Bhd, which operates TNG eWallet, is set to turn in its first full-year profit next year amid aggressive plans to leverage its broader range of products to strengthen its market share.

Speaking to The Edge in an exclusive interview at its headquarters in Kuala Lumpur, CEO Alan Ni says with certitude that the coming quarters can only be profitable as the profit in the third quarter from July to September was “not a one-off”. The company has been emphatic about cross-selling and upselling its wide array of products while balancing the cost reduction aspect of its operations.

“The digital payment business in Malaysia is a difficult business to be in. Our profitability depends largely on upselling/cross-selling and cost reduction. Hence, we offer a broad suite of consumer financial services such as insurance, visa cards, remittance, and lending and wealth management via collaborations with financial institutions,” says Ni, who was appointed in April 2022 after having served as the company’s chief operating officer since 2018. He previously held roles in senior risk management, fraud and credit operation at CIMB Group and Standard Chartered Bank.

A company search reveals that while TNG Digital recorded substantial revenue growth over the years — ballooning 1,180% from RM2 million in the financial year ended Dec 31, 2019, to RM26.7 million in FY2020, and by 101%, 170% and 62.3% in the subsequent years to an impressive RM234.5 million in FY2023 — the company was mired in net losses. Its net loss of RM270.3 million in FY2019 narrowed to RM190 million last year.

Ni notes that e-wallet transactions have become, by far, the most popular of digital transactions in Malaysia. “The frequency of e-wallet transactions is already more than three times that of credit cards and debit cards combined. Total transactions [on our platform] have surpassed debit card usage since the late-2022 to early-2023 period, coming close to 90% of the total debit card and credit card transactions in the country,” he claims. However, the credit card industry is still tops in terms of total transacted value.

Pointing to data by Bank Negara Malaysia showing the rising popularity of e-wallet usage in recent years, he says the total value transacted in the e-wallet industry was on par with that of the debit card industry.

“The central bank has been very supportive of e-wallet usage because the [product] is very complementary to the bank. If Bank Negara has the ambition (for Malaysia) to become a cashless society, [digital payment methods] should cover both big and small merchants. In addition, there are certain segments of the underbanked which the bank finds difficult to reach, such as the [large] foreign worker space. It is hard for this group of people to open a bank account but getting an e-wallet account is easy,” Ni explains.

He estimates that from the pool of over 50 e-wallet licences issued by Bank Negara, more than 30 e-wallet players have launched platforms.

Based on the 22 million eKYC-verified users on its platform, TNG eWallet commands more than 60% of the total market share in Malaysia, says Ni, who believes that Maybank’s MAE app has the second biggest piece of the pie.

“TNG eWallet is already at a very high penetration rate. We will soon hit the ceiling when we get the targeted 33 million users on our platform. A [more meaningful] growth will be by deepening our relationship with existing users to boost user transactions. We offer features to pay for parking or [make purchases] on Lazada, Apple and Google,” says Ni.

TNG Digital is 45.01%-owned by CIMB Group Holdings Bhd [KL:CIMB)’s 100%-unit Touch ‘n Go Sdn Bhd, with the balance held by Antfin Singpore Holding Pte Ltd (23%), Alipay Singapore Holdings Pte Ltd (11.62), AIA (3%), Lazadapay Holdings Pte Ltd (11.38%) and ASP Malaysia LP (5.99%).

Ni is aware of the growing concerns among the public about sufficient security safeguards for funds held in e-wallet accounts. After all, government agency Perbadanan Insurans Deposit Malaysia (PIDM) — established under Akta Perbadanan Insurans Deposit Malaysia and governed by a board of directors appointed by the Minister of Finance from the public and private sectors — is understood to only protect depositors if a bank goes bankrupt.

The coverage extends only to customers of PIDM-member banks, and is not applicable to e-wallets like TNG eWallet. “Bear in mind that PIDM only covers users in the event of the bank’s failure, and not scam nor fraud,” he points out.

“A user wouldn’t mind loading up their e-wallet with a few hundred ringgit. But not a sum in the thousands or tens of thousands. Users are concerned that without PIDM’s coverage, and should [TNG Digital] run into problems, they would not get their money back,” Ni says.

He then explains that the central bank has designed different rules for banks and e-wallet players, given that they operate very differently. “Banks use account holders’ deposits for the institution’s investment and lending activities. Therefore, how the monies are used for investments can have a huge impact on the account holder. This is where PIDM comes in — to protect your money should the bank fail.”

He explains that e-wallet players, on the other hand, are required by Bank Negara to put users’ funds into a trustee account, which only allows for the users’ own transactions.

“It would be illegal for TNG Digital, for instance, to utilise these accountholders’ funds for our operations or investments. And in the event that TNG Digital [or other e-wallet players] fail, its users’ funds will be returned to them by the trustee. That is how PIDM protects banks’ end users, and Bank Negara’s trustee protects e-wallet users,” Ni assures, adding that the central bank governs e-wallet players tightly via frequent audits, risk assessments and compliance checks.

On TNG Digital’s safeguards for its users, Ni explains TNG eWallet’s introduction of a 1% fee for all credit card reloads on Feb 23 this year. “The banks’ charges for credit card reloads were quite heavy since the start. We were subsidising users’ reloads but once the business grew to this scale and the bank charges came up to millions of ringgit monthly, it was no longer commercially viable to keep subsidising them.”

By imposing the 1% reload fee for credit card reloads, TNG Digital was also taking care of a second problem, deterring the small percentage of users who were reloading the TNG eWallet using their credit cards, and then transferring the funds back into their banking accounts for immediate cash out.

“They were hurting us financially as we were paying the bank charges for their reloads, while these users were not even using our platform to make payments,” says Ni.

Thirdly, TNG eWallet implemented five mandatory measures by the central bank such as the biometric authentication feature (live facial detection) and TapSecure technology. As the application detected fraudulent transactions and unusual activities such as extraordinarily frequent or large transactions, the adoption of the safety triggers helped to reduce fraud-related losses by nearly 50% within one year, Ni says. “The fraud rate for TNG eWallet remains low, at 90% below the overall market rate for card payment fraud.”

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