IF one were to connect the dots of Malaysia’s payment system back to the 90s, the establishment of Touch ‘n Go Sdn Bhd is arguably the nation’s first step into the world of financial technology (fintech). It started in 1996 as Rangkaian Segar Sdn Bhd, purely as a card-based electronic toll payment system called Touch ‘n Go, as a more efficient alternative to cash to ease toll congestion.Fast forward 25 years later and the advancement of technology has evolved Touch ‘n Go from a reliance on a business line to expansion in business lines and through the right partner, making it the main driver of Malaysia’s cashless agenda at present. Its joint-venture (JV) with Ant Group culminated in a widely accepted Touch ‘n Go eWallet in Malaysia.Easing the flow: Helping expressways further ease congestion is part of Touch ‘n Go’s continuous innovation in creating better products for transportation ecosystems Banking on the strength of its transportation ecosystem and the eWallet under its subsidiary TNG Digital Sdn Bhd, Touch ‘n Go has also rolled out better solutions in the form of TNG RFID and PayDirect. There are currently 25 million active cards, 15 million eWallet users and 1.5 million RFID tags in Touch ‘n Go’s entire ecosystem. But it is not a company that will rest on its laurels, especially not under the watchful eye of its newly-minted group chief executive officer (CEO), Effendy Shahul Hamid. Effendy was appointed in November 2020, in addition to his continued role as CEO of CIMB Digital Assets.Speaking to StarBizWeek in his maiden media interview as the group CEO of Touch ‘n Go, Effendy lays out his aspirations for the group to reach its absolute potential. “My outlook is creating a great company and not just being happy with what we have. “From a strategic perspective, we want to build the Touch ‘n Go group into a real technology enterprise.“Our aspiration is to continue to innovate and cement our position in the areas that we’re strong in, which is transportation and mobility and to use the new-age payments business to basically fuel an area for growth, ” he says. Effendy is no stranger to Touch ‘n Go, having served as the group’s director since 2015 when he was then the CEO of CIMB’s group asset management and investments.Rangkaian Segar changed its name to Touch ‘n Go in 2008, during the time when CIMB Group Holdings Bhd only held 20%. The bank upped its stake to 52.22% in February 2010, while PLUS Malaysia Bhd and MTD Capital Bhd held 20% and 27.78%, respectively. It was only in October 2019 that CIMB bought out PLUS and MTD’s subsidiary MTD Equity Sdn Bhd to control the entire 100% stake in Touch ‘n Go.“At that time (2015), I guess we were trying to figure out what to do with the company. We found that growth was not as high as what it was previously because toll traffic was already almost 100%.“Transit was growing but the volumes were small. Parking volumes were also small compared to tolling.“Everyone knew the next growth engine was going to be retail payment, and at that point in time, we had three strategic options – one was to do retail payments ourselves, the second was not to do anything or the third, which is what we (CIMB companies) do very well – partner ourselves out of trouble, ” Effendy says."Our aspiration is to continue to innovate and cement our position in the areas that we’re strong in, which is transportation and mobility and to use the new-age payments business to basically fuel an area for growth." Effendy Shahul Hamid Like a match made in heaven, Touch ‘n Go approached the largest fintech company in the world, Ant Financial (now known as Ant Group) for a JV, at a time when it was also expanding in the region through JVs.Ant Group operates Alipay, China’s largest digital payment platform. Together, they formed a JV company named TNG Digital, which operates the Touch ‘n Go eWallet.Touch ‘n Go owns 51% in the JV, while the remaining 49% is held by Ant. Despite being a late entrant into the e-wallet space, the Touch ‘n Go eWallet that was launched in 2017 has accelerated to become Malaysia’s largest e-wallet since 2019. “And the thesis of us starting it was because we have a great customer base, the branding that Touch ‘n Go has and a great sticky use case in transportation would be able to turn into a very successful payments and everyday wallet business, ” he says.Strategic aspirations The group’s first strategic lever is to ensure that it continues to have the right business line to serve and ride the growth trajectory.These will come from Touch ‘n Go’s continuous innovation in creating better products for expressways and other transportation ecosystems. An example is how to help expressways further ease congestion, which can get pretty ugly at a toll plaza when a driver does not have sufficient balance in their Touch ‘n Go card and eWallet to enable toll payments through TNG RFID or PayDirect.The RFID Tag is a sticker that is embedded with a radio frequency chip, unique to each user. Tied to the Touch ‘n Go eWallet, it is affixed to either the windscreen or headlamp of a vehicle and used as a form of electronic payment for tolls. PayDirect is a function that allows drivers to pass through tolls as usual with their Touch ‘n Go cards, but toll fares will be deducted from their eWallet instead.“We’re working with expressways today to put into place solutions to allow the gate to always open if you have a certain profile.“It could be anchored not just on monies in the wallet, but whether you have certain savings or investments with us or maybe we can put in place a smart credit behaviour mechanism to allow people to go through, ” Effendy explains, adding that it is also working on making parking more PayDirect. The second strategic lever is on the eWallet front, with a clear view of moving the infrastructure into financial services.TNG Digital was recently granted conditional approval to operate as a recognised market operator (RMO) by the Securities Commission, making the Touch ‘n Go eWallet the first e-wallet to obtain the approval. This enables TNG Digital to directly distribute capital market products, including money market unit trust funds, through the Touch ’n Go eWallet platform, without having to be directed to third-party applications.Driven by Covid-19 The Touch ‘n Go eWallet ended 2020 with approximately 300,000 merchants on its platform comprising more than 150,000 SMEs and Micro SMEs. The concept of dealing with cash and the downside that comes with it started to jive well among users and businesses, even more so during the pandemic, which led to strong take-up of micro merchants.The steady growth in the usage of the eWallet has seen toll payments accounting for only about 10% of the eWallet’s total payment value (TPV). The eWallet also recorded an uptick in online TPV, which was a good counter to the slowing offline TPV.“Those are the general things we have seen with Covid-19 and I think that we’ve been able to combat it quite well, but the key point here is how the company is run.CLICK TO ENLARGE “TNG Digital is run in a very agile, elastic way. So, the moment Covid-19 started, we could very quickly shift our priorities to enhancing SME micro businesses and electronic and online businesses by creating a very easy self onboarding platform.“Do I wish that Covid-19 did not happen? Of course. But sometimes, it is events like this pandemic that has allowed us to sharpen some of our thinking. “So, Covid-19 did not only allow us to pivot our separate products and services to match the market, but it also allowed us to make sure that we are properly organised for the future, and I think that’s very important, ” Effendy says, adding that everyone wants to take advantage of the market but many do not pay enough attention to the structure of the company, its elasticity and mindset to evolve.Effendy is also of the view that the days where companies can go it alone are gone. “No company is an island today and I think that we will have to do more partnerships to win, not necessarily equity partnerships only but just partnering up on commercial solutions with different types of companies.“For example, we are starting to work with some petrol stations to see how best payment solutions can be put in petrol stations and these include RFID applications to e-payments and e-wallet applications.“I’m of the view that companies that strike the best partnerships early on are companies that will win in this world today, ” he says, adding that the new-age companies must always partner to get better. Focusing on both cards and RFID Rather than it being counter-intuitive, Touch ‘n Go believes its focus on both cards and RFID will be seamless and one that is very much part of the user journey.A lot of highways in Malaysia are now RFID-enabled and the group is committed to working with the Malaysian Highway Authority and expressways to make more RFID lanes available, in line with the government’s multi-lane free flow (MLFF) aspirations by 2025.“If you think about the long run from the highway perspective, things will move to RFID, and for us, it’s good because what we do is we make sure the RFID works better and better, ” Effendy explains. There are currently 155 RFID lanes across open-tolls in the Klang Valley, Penang bridge and the PLUS close-toll loop of Hutan Kampung-Sungai Dua. “Meanwhile, parking is still as per normal. What we are doing is more of moving parking to a PayDirect model. “And whether or not parking moves to RFID is a question mark. It depends on the economics and how the models work and we’re discussing this with parking operators and building owners today but that’s still card based.“Cards are still being widely used in the transit space and really, it’s us needing to work and engage our clients to see what the preference is, ” he says, Customer centricityThe customer journey in every product or service is of utmost importance and this is an area where Touch ‘n Go intends to take on a very customer-centric focus, moving forward.The group is kicking this off by removing all Touch ‘n Go parking surcharges by the first quarter of this year. The surcharge has been among the main complaints by the consumers. “We’re well on our way towards doing that. “It requires innovation and some sacrifice on our part, but I think it’s the right thing to do. “Basically, we’ve been able to convince our parking operator partners and ensure the surcharge is removed by the end of the first quarter, ” Effendy says. Picking up on this development, Touch ‘n Go is also working towards a zero reload fee for its cards with its agents, quite a number of whom have already removed the 50-sen charge per reload. It has to be noted that Touch ‘n Go does not receive any amount of the reload fee, and on top of that, it pays its top-up agents to provide the service.The surcharge has historically been levied by reload agents to defray the specific cost of providing the reload service. Another request that the group plans to fulfill is the facility to top up Touch ‘n Go cards using the eWallet. It is currently fast tracking the development of a new batch of Touch ‘n Go cards that can be reloaded directly from smartphones using the Touch ‘n Go eWallet.The cards are expected to be available by the end of the year. The cards currently in circulation are smartcards with MIFARE chips and transactions can only take place upon contact with a card reader, therefore rendering the reload over the app impossible. Effendy points out that the only reason Touch ‘n Go is doing all these is because of customer feedback.“We’re starting to listen to customer feedback in terms of what are the things that we can do and we’re starting to engineer the company around that, on the transportation ecosystem company side and also on the eWallet side.“So, it’s quite interesting. I do think that you will find things happening in stages, but you will find that by the end of the year, I feel that we will stand out as a really relevant solutions provider of multiple technology services to our customers, including transportation. “I want to make sure that the focus is on the customers. My corporate customers (expressways, parking and transit operators) and eWallet users. “The focus needs to be quite holistic, so all corporate, SME and retail users of our services are addressed. “If we do not take a very customer-centric focus, we’re not going to be able to do it. Therefore, we’re going back to the basics that way, ” he says.
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