SINGAPORE: When Chocolate Finance discovered that some customers were “gaming” its miles reward system by making big payments on AXS machines, the financial services platform decided to “nip it in the bud”.
This led to “a lot of unhappiness that such a lucrative benefit was suddenly cut short”, founder and CEO Walter de Oude said on Monday (Mar 10).
The change wasn’t properly communicated to customers, who grew uneasy and started withdrawing their funds – hence depleting the pool of liquidity that Chocolate Finance maintains for instant withdrawals.
It ultimately meant the instant withdrawal service had to be temporarily suspended.
Mr de Oude was speaking to CNA in an exclusive interview hours after Chocolate Finance issued a statement attributing the suspension to an “unusually high” number of requests.
Chocolate Finance is operated by Chocfin, which is licensed and regulated by the Monetary Authority of Singapore (MAS) to perform fund management activities.
In response to CNA’s queries, MAS said it has instructed Chocfin to ensure it returns funds to customers in an orderly manner and to keep customers informed of developments.
“MAS is separately querying Chofin about its representations of its instant withdrawals (programme),” a spokesperson said.
“ABSOLUTELY HUGE PAYMENTS” ON AXS
When Chocolate Finance designed its miles reward programme, the firm wanted its debit card to be “all inclusive” so that customers could earn on nearly anything they spent on.
This included education fees and AXS, a bill payment platform.
Mr de Oude pointed out that shops usually pay a fee to services firms like Visa or Mastercard each time a card is used, and that the fee is shared with the company issuing the card – Chocolate Finance, in this case.
When a card is used at an AXS machine, however, Chocolate Finance doesn’t get any benefit.
“Yet, we were sponsoring the miles,” said Mr de Oude, who previously founded insurance firm Singlife.
Chocolate Finance knew its miles programme would not be sustainable based on AXS transactions alone, but had hoped that the gains from other transactions would “subsidise” the miles it was sponsoring.
The company thought there would be a balance that way, but it didn’t play out in reality.
“There was a little bit of gaming going on by customers,” said Mr de Oude, adding that it gradually became “quite evident” that the company could not keep giving miles on AXS transactions.
“We had a couple of customers making absolutely huge payments on the cards … specifically on the AXS to really maximise miles.”
