IN FOCUS
In today’s newsletter, we look at:
- Why lower interest rates can translate to higher profit for wealthtech platforms
- The Boyaa-bitcoin bromance
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Hi there,
When Chocolate Finance officially launched its cash management product in August, I was happy to place my spare cash there, figuring that the 4.2% annual interest rate it offered – up to S$20,000 (US$14,900) of balances – was a good deal, especially compared to the pittance I was being paid when it was left in a bank.
Last month, the platform lowered its interest rate for the product to 3.6% per annum. However, I have left my cash there for now, because I have yet to find a better use for it.
I suppose my behavior – and many other users who are thinking the same – could explain why Chocolate Finance has seen “almost zero outflows” following the rate revision.
As my colleague Melissa points out in this week’s featured story, Chocolate Finance, along with other wealthtech platforms in Singapore such as StashAway and Endowus, aren’t seeing money being taken out of their cash management products. On the contrary, customers are putting more funds in them.
That’s not to say that the trend won’t reverse if further rate cuts by the US Federal Reserve materialize. However, lower interest rates might be a net positive for wealthtech platforms since they generally earn a higher fee on other investment products. If customers move their funds to those products because of their higher expected returns, it should translate into bigger revenues.
Meanwhile, in this week’s Hot Take, I look at how Hong Kong-listed game operator Boyaa appears to be turning itself into a proxy for bitcoin. While this has lit a fire under its stock price, it also comes with attendant risks.
— Simon
THE BIG STORY
Lower rates, bigger bucks: Can wealthtech firms deliver?
Image credit: Timmy Loen
The high returns of cash management products drew investors. Falling interest rates are now prompting some to look further.
THE HOT TAKE
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