Touch 'n Go, Alipay join hands to tap RM4b e-wallet market

KUALA LUMPUR: CIMB Group Holdings Bhd’s 52.22% subsidiary Touch ‘n Go Sdn Bhd (TNG) is embarking on a joint venture (JV) with China’s leading online payment platform Alipay to enable mobile wallet solutions in Malaysia, which analysts say will undoubtedly benefit TNG.

Frost & Sullivan Asia Pacific digital transformation industry principal Quah Mei Lee told SunBiz that TNG stands to gain by leveraging on the strong financial backing and global expansion experience of Ant Financial, parent of Alipay. The other new financial services to be offered will help to increase TNG’s revenue and base in Malaysia.

“In terms of acceptance, TNG’s limited acceptance will ride on the growing Alipay acceptance. However, this growth will be competing with the KPI-driven (key performance index-driven) aggressive push for debit card acceptance and use. Although usage of debit card is still low, an estimated 83% or more of the population now has a debit card in hand,” Quah said.

She said the mobile payments market in Malaysia was estimated at close to US$1 billion (RM4.1 billion) in 2016. The market is expected to grow at a compounded annual rate that is close to that of Asia Pacific levels of 28.7% during 2016–2021.

“The JV will definitely help spur the growth of mobile payments in Malaysia,” Quah said.

A banking analyst said this deal will be earnings-accretive for TNG, although its contribution to CIMB Group is not big. He added that in the first two years, the partnership will directly boost TNG’s earnings, and as it is already in leading position, the group will not need to incur much expenses.

“TNG will replicate the success of Alipay in China in Malaysia, because TNG already has its foundation in Malaysia and in various businesses. What they need is just a tweak to complement the business, such as this (JV),” the banking analyst said.

In 2016, TNG’s revenue contribution to CIMB group stood at RM115 million, or 0.7% of CIMB Group’s revenue of RM16.07 billion.

Currently there are 10 million active TNG cards in Malaysia, used for electronic payment purposes at toll roads, public transport systems, parking lots and retail outlets.

TNG yesterday entered into an investment agreement with Alipay, a subsidiary of the world’s leading digital financial services provider Ant Financial Services Group to set up a JV entity to be incorporated in Malaysia. TNG will be the majority shareholder and Alipay the minority shareholder in the JV to launch a new mobile platform for payments and other related financial services in Malaysia.

The capital injected by both parties, which was not disclosed, will go towards the creation of a world-class online and offline payments provider, mobile wallet solutions and other related financial services, leveraging on the respective partners’ local market insights, technology capabilities, market experience, and brands.

“We’re prepared to invest significantly in fintech propositions that will deliver the best value and enhance our customer experience for all our customers,” CIMB group CEO Tengku Datuk Seri Zafrul Aziz said in his speech at the signing ceremony yesterday.

The new e-wallet will give current and new TNG users access to more services on their mobile phones. A local brand is expected to be built.

“This will be a new thing for Malaysia, we expect to put differentiated services,” said CIMB Investment Bank Bhd group asset management & investments CEO Effendy Shahul Hamid. The JV will have its own management and board.

TNG will have the exclusivity to develop the mobile wallet with Alipay in Malaysia, but Alipay is open to working with other banks for the e-payment ecosystem, including funding and acquiring merchants.

This marks Ant Financial’s first investment in Malaysia. Ant Financial provides a wide range of digital financial services to over 520 million users in China and beyond. Over 10 million brick-and-mortar merchants now accept Alipay across China. Ant Financial is also enabling local partners in India, South Korea and Southeast Asia to provide digital payment and innovative financial services to local users.

CIMB’s share price closed marginally lower at RM6.34 yesterday, with 8.34 million units changing hands.

The proposed JV is not expected to have any material effect on the earnings per share, net asset per share, gearing and share capital of CIMB Group for the financial year ending Dec 31, 2017.