MAS tells fintech platforms to communicate underlying products in investment accounts clearly: sources

[Singapore] Fintech platforms have been told by the Monetary Authority of Singapore (MAS) to clearly communicate underlying products in their investment accounts.

This move is likely a response to the Chocolate Finance incident, when a pause on instant withdrawals due to a redemption run resulted in confusion by customers and online commenters on whether Chocolate Finance is a bank.

In an earlier interview with The Business Times, Chocolate Finance founder Walter de Oude said that “customers don’t read the fine print”, even if the asset manager has done everything it has supposed to.

According to sources familiar with the matter, fintech business leaders were called for one-on-one meetings with the regulator last week to communicate this stance. MAS appears to want consumers to be clear that a fintech platform that offers underlying banking products does not equate to it being a bank.

These meetings came in the wake of customer panic over Chocolate Finance’s pause on instant withdrawals after a redemption run over a weekend. The asset manager also implemented transaction limits on its Visa debit card during this incident.

The redemption run was sparked off when the asset manager cut off AXS payments. It did so after customers exploited the HeyMax-Chocolate Finance partnership which paid out a two-mile-per-dollar reward on all spending categories including bill payment.

“We had people spending S$300,000 on bill payments and cycling money and paying insurance premiums on other people’s behalf, and just general misuse,” said de Oude.

The responses from customers and commenters online saw confusion over whether Chocolate Finance is a bank or an asset manager. Chocolate Finance is licensed as a fund management service provider by the MAS.

Chocolate Finance has since paid out all redemption orders to the tune of some S$500 million, which resulted in its assets under management slashed by some 40 per cent.

Fintech platforms now offer a plethora of investment options for retail investors, who can put in cash or money from their Central Provident Fund. Most of these players’ cash options go into an investment account that will buy into money market funds. Some offer accounts with underlying fixed deposit products that find the best fixed deposit rate across the banks.

BT has reached out to MAS for comment.