We have all been there: a frustrating wrestle with a bank to find out what has happened to a lost or delayed money transfer.
Serial technology entrepreneur Alex Kong understands this better than most. He reckons the traditional money transfer system that the big banks use is broken and that the days of lost and expensive foreign payments should be long gone.
“In the financial industry, all the banks, all the settlement, is so stupid,” says Kong. “It goes through the correspondent banks and multiple layers. Why is it taking more than one week, and yet the forex charges are so lousy, so high? I’ve seen through all that and said: ‘OK, how do we simplify the whole process?’ And this is it.”
Kong’s “it” is his Hong Kong-based fintech hothouse The Next Generation, or TNG. With TNG’s e-wallet, users can send and receive money across the globe in real time for a $3 fee, and chat with their transfer partners, WhatsApp-style, while doing so.
But that is only a part of it. Kong’s big idea with his TNG e-wallet is to transform everything that handles money, from individuals to high-street shops, into a multi-currency cash dispenser and mobile payment platform, effectively doing to money what Uber is doing for drivers – and then some.
“We want to provide frictionless global money transfer, where everything happens in real time,” he says.
Outwardly, TNG is aimed at the world’s unbanked and underbanked, a market that Kong tallies at around two billion people, many of them in Asia. Integrating them into the global financial system would increase global economic output by 6%, he says.
Numbers like that may look good for the influential backers Kong has gathered en route to TNG’s planned initial public offering in the US, which could go ahead as early as 2019.
The platform has quickly been adopted by diaspora communities, who account for some of the $600 billion in international remittances that take place every year, as well as so-called ‘globos,’ the region’s nomadic professional classes with cross-border interests.
Kong says TNG targets the unbanked partly because they have limited experience of traditional banking and are therefore less reluctant to change to something different. But he expects existing bank users, particularly those who are more open to technological change, to embrace TNG.
“We want to leapfrog,” Kong says. “It’s difficult to ask people to switch their religion, so to speak. The switching cost is very high and there is a traditional relationship with the existing bank. So, to ask [users] to try out our platform, which is better, is going to take a huge effort.”
Serial technology entrepreneur Alex Kong
Sarawak-born Kong is well known in Asian technology circles. As Asia struggled to re-invent its economic base after the devastating financial crisis of the late 1990s, Kong was one of the first e-commerce poster boys to make a splash.
A graduate of the University of Hawaii’s travel industry management school, Kong was behind one of Asia’s first e-commerce sites, asiatravelmart.com, launched in 1997. It was heading for a Nasdaq listing, but then the tech market meltdown in 2000, the September 11 attacks and the post-crisis capital controls in Malaysia, where he was based at the time, put an end to that dream.
Bowed but not beaten, this serial entrepreneur went on to build and operate reservation and booking systems for some of Asia’s leading hotels and airlines. Then he moved on to some of Asia’s first payment apps as smartphones took off.
His company, Sino Dynamic Solutions, has created payments systems for a number of businesses, from ferry tickets for Hong Kong-Macau shuttles to mortgage applications, real estate searches and insurance.
TNG has backing from investors in China, Taiwan and Israel, notably from Chinese private equity firm NewMargin Capital, which in turn has backing from Singapore’s GIC sovereign fund, Malaysian billionaire Robert Kuok and a brace of Chinese state enterprises.
A funding round last September raised $115 million to give TNG a notional value of close to $600 million.
Kong sees himself as a disruptor, and believes he was ahead of his time for the mass-market adoption of payment technology.
“I disrupted the tourism and travel industry, and now I’m doing the same thing in the financial industry,” he says. “It’s 20 years after asiatravelmart. I think the time is right.”
[TNG] uses the same standards as a bank. We have a very high risk-management standard- Alex Kong, TNG
Since the TNG app was launched in November 2015, it has been downloaded more than more than one million times, the platform claims. In March this year, TNG says it processed around one million transactions, with a total value of more than $100 million.
Kong is steadily building a vast network of partners including service providers, banks and cash pick-up points.
“Globally, we have a network of 852 banks and over 183,000 cash pick-up points,” he says.
TNG is directly licensed and regulated in five places: Hong Kong, Singapore, Malaysia, Indonesia and the UK.
Kong says TNG has applied for a virtual bank licence in Hong Kong and the UK, which would allow it to extend loans. That would mean it can enter the lending market for remittance-senders whose current options tend to involve much higher borrowing costs.
Because it moves money globally, TNG is compelled to comply with global anti-money-laundering and know-your-customer standards.
Kong claims TNG “uses the same standards as a bank. We have a very high risk-management standard.”
In its Hong Kong base, Kong says, TNG is fully licensed by the territory’s central bank, the Hong Kong Monetary Authority, and is subject to its supervision.
In 2016, TNG was granted a so-called stored value facilities licence by the HKMA, which allows it to access the territory’s remittance market.
Kong says TNG partners “with local service providers which have the licence with the local regulator”.
The TNG network has quickly expanded using direct relationships or by linking up with 13 popular e-wallet partners across Asia.
“Once they join us, we make them able to roam globally,” he says.
That means a user of Vietnam’s popular Vina e-wallet can transact with a Bangladeshi user of that country’s widespread bKash payments system.
Across Asia, Kong and his partners have signed up the region’s big banks, including HSBC, Standard Chartered, ICBC and DBS, as partners.
In the Philippines, TNG has an established relationship with SM Supermalls, one of Asia’s biggest developers of commercial space with 77 malls across the Philippines and China, and with the Cebuana Lhuillier group, which owns pawnshops across the nation and is a big remittance operator.
In Vietnam, users don’t even need a bank account to use an ATM. A user can key in a transaction PIN at a participating bank’s ATM to collect transferred cash.
In Bangladesh, TNG users can access 40 banks and 92,000 cash outlets; in Pakistan, 47 banks and 58,000 outlets are on the Mobicash platform. TNG has also teamed up with convenience stores Seven-11 and Circle K in Hong Kong.
TNG’s users can also pay bills across countries, which Kong says appeals to diaspora breadwinners, whether a Filipina domestic maid in Singapore supporting her family back home, or a Hong Kong-based user with a vacation home in Bali.
Bills, such as school fees or vacation costs, and other running costs, such as retainers for local caretakers or cleaning staff, can be paid using the e-wallet, avoiding the need to set up cumbersome cross-border and fee-heavy bank accounts to facilitate transfers that can take weeks to arrive. Plus recipients do not need to visit local banks – because they may not be convenient – to get their money.
Kong says that about a fifth of TNG’s clients are foreign workers, mostly Filipinos, regularly making remittances to friends and family back home.
Another unusual function is the ability to reject a transfer. Kong says this helps with KYC laws. In traditional banking, payments generally cannot be rejected without the recipient advising the bank in advance not to receive an incoming transfer.
There are many reasons why one might reject a transfer, not least if it is a bribe or a short-changed bill, which in some jurisdictions might legally amount to acceptance. On TNG’s platform, would-be recipients can assess the provenance of the money and decide whether to accept it or not.
A transfer will be valid for collection over 72 hours with the exchange rate at the initial point of transfer locked in, at a fee of HK$23 (about $3). If the cash is not collected after three days, it transfers back to the sender’s wallet at the rate of that moment. Transfers from one e-wallet to another incur no charge.
With traditional banking, Kong notes, “if I deposit money into your bank account, you can’t say no. But you can get into trouble. Authorities can ask you the source of funds.”
With TNG, there is a cooling-off period of 14 days where a recipient can determine whether to accept the transfer or not. If rejected, the money returns to the sender, with a history of the attempted transaction as evidence.
“You don’t see this offered by anyone in the world,” Kong claims. “We have competitors in each of the elements of the platform, but no one has put it all together like us.”