Fixed deposits may be safe and predictable, but they ask for a lot in return. To get the best rates, you may need to deposit thousands of ringgit and lock in your money for a few years. Withdraw before your tenure is up, and you may get an interest rate penalty. Besides that, interest rates have dipped in the past few years – the average six-month deposit rate is only around 1.8% p.a.
On the upside, a few digital platforms are now offering alternatives in the form of cash management solutions. These may have return rates on-par with or better than fixed deposits, without any interest penalties or lock-in periods.
In Malaysia, robo advisor platform StashAway offers StashAway Simple, a cash management portfolio. There’s also Versa, which partnered with Affin Hwang to launch its digital cash management platform.
And then there’s the newly launched GO+ by Touch ‘n Go. While GO+ markets itself as an eWallet investment solution instead of a cash management solution, we included it in this comparison as it also allows users to invest in money market funds digitally.
So how do these platforms work, is it worth putting money in them and which platform should you choose? Here’s what you need to know.
How do they generate interest returns?
These platforms invest your deposits in money market funds, which include short-term debts that are loaned to banks and the government. These funds also hold deposits from banks. There is little risk involved as they invest in high quality debt that matures quickly.
What are the advantages?
- No lock-ins. Your interest returns are computed daily, so you don’t need to deposit your money for a specific amount of time to get the best interest rates (as with fixed deposits). You can withdraw anytime without incurring interest penalties.
- Easy access. Signing up for these platforms takes minutes. It’s a convenient way of investing in money market funds.
- Potentially higher returns. Money market funds can potentially deliver higher returns than fixed deposits.
- Low minimum deposit. Conventional savings or investment products typically require a minimum deposit. For instance, you may only get the best interest rates with savings or fixed deposit accounts if you can place a minimum of a few thousand ringgit. Unit trust funds usually ask for an initial RM1,000 investment. But with cash management platforms, there are no tiered interest rates, and minimum deposits can be as low as RM1.
What are the downsides?
- Withdrawal takes time. Taking your money out from a savings account or fixed deposit is instant. But with these platforms, withdrawal can take a day or more.
- No PIDM protection. Your bank deposits (e.g. in savings accounts, current accounts and fixed deposits) are automatically protected by Perbadanan Insurans Deposit Malaysia (PIDM). In the unlikely event that your bank fails, PIDM will reimburse you with the money you have deposited, up to RM250,000. However, any money deposited in these cash management platforms are not protected under PIDM.
- Projected returns can change. While these platforms state a projected annual return, your actual returns depend on the underlying money market fund. If the fund underperforms, the platform may change the projected return.
Can’t I invest directly in money market funds?
At this point, you may be wondering: can’t you invest directly into money market funds, without going through these platforms?
Well, you can.
You can invest in money market unit trusts through your bank, fund management institutions or sites like Fundsupermart (at zero sales charges, too). But going through a cash management platform has a few perks:
- Potential fee rebate. The underlying money market fund may offer management fee rebates to the platform, which may be passed on to you.
- Convenient access. Investing in unit trust funds conventionally can take days to process a transaction. But with these platforms, signing up and investing is potentially faster.
- Potentially faster processing. When you sell unit trusts through conventional platforms, it may take a few working days for the money to be deposited into your account. But some cash management platforms may allow you to receive your funds within one working day.
What happens if these platforms close down?
When you make a deposit into one of these platforms, they won’t actually hold your money. Instead, your funds are kept in a trustee account belonging to a third-party firm. So if the platform closes down, you will still have access to your money.
Whenever you invest, make sure the platform is licensed by the Securities Commission so you know they’re following the proper procedures when it comes to handing your money.
StashAway Simple vs Versa vs GO+ comparison
Here’s how these platforms compare at a glance:
|Touch ‘n Go eWallet GO+||StashAway Simple||Versa|
|Underlying fund||Principal e-Cash Fund||AmIncome Fund||Affin Hwang Enhanced Deposit Fund|
|Fund management fee p.a.||Up to 0.45%||Approx. 0.50%||0.30%|
|Trustee fee p.a.||Up to 0.03%||0.05%|
|Projected returns p.a.*||1.50%||2.4%||Between 2.0% and 2.1%; up to 2.4%|
|Withdrawal processing time||To Touch ‘n Go eWallet: instant
To bank account: within 1 business day if request is submitted before 4pm
|3 to 4 business days||Within 1 business day if request is submitted before 2.30pm|
*Net returns after covering fund fees; accurate at the time of writing but may vary daily
Read on for more information about each platform.
Touch ‘n Go eWallet GO+
If you’re an existing Touch ‘n Go eWallet user, it’s easy to sign up for GO+. Just fire up the eWallet app and click on the GO+ icon.
You can deposit funds from your eWallet balance or your bank account. Withdrawal to your eWallet balance is instant, while your withdrawal to your bank account will take at least one business day. If your eWallet balance is insufficient to make a payment, the app’s Quick Reload Payment feature that is enabled by default can automatically withdraw the exact amount from GO+ to complete the payment.
But don’t expect high returns: at the time of writing, its current projected interest rate is 1.5% p.a. (though it varies daily). This is lower than the average 6-month fixed deposit rate. If you put in a RM100 or so, this could mean getting a return of less than a fraction of a cent a day. However, it is a convenient way to get returns on your dormant eWallet balances, which would otherwise be just sitting there anyway.
GO+’s underlying fund is the Principal e-Cash Fund, which launched on March 15 this year. It has a management fee and trustee fee of 0.45% and 0.03%, which is higher than the fund fees of other cash management platforms.
Currently, you can only hold a balance of up to RM9,500. There’s also an aggregate limit of RM5 billion – this means that if the total GO+ balances of all customers reach RM5 billion, you won’t be able to deposit any more funds into GO+.
++ Get returns on dormant eWallet balances
++ Can be automatically withdrawn for payments
++ Withdrawal within one business day
— Lower projected returns than other platforms
— Higher fund fees compared to other platforms
— Balance limit of RM9,500
StashAway Simple launched last year, marketing itself as a fixed deposit alternative.
Its underlying fund is the AmIncome Fund. Here’s how it performed in the past five years:
The fund has management fee and trustee fee of up to 0.75% and 0.05%. However, the fund passes on a 0.30% rebate to StashAway, which is then passed on to you. After the rebate, the net expense ratio is approximately 0.50%.
With StashAway Simple, it takes three to four business days to process fund withdrawals. This can be inconvenient if you need quick access to cash.
++ Manage both your StashAway Simple funds and StashAway investment portfolios with the same app
— Withdrawal takes several business days
— Higher fund management fees compared to other platforms
Versa markets itself as a digital cash management platform that offers interest rates on-par with fixed deposits.
Currently, its projected interest rate is between 2.0% and 2.1%, and up to 2.4%. Like GO+, it has a relatively speedy withdrawal processing time of within one business day.
Its underlying fund is the Affin Hwang Enhanced Deposit Fund. Here’s how it performed in the past five years:
The fund has a management fee and trustee fee of up to 0.50% and 0.05%. But when you invest through Versa, you’ll only pay 0.30% and 0.05%. This is lower than the underlying fund fees of GO+ and StashAway.
++ Withdrawal within one business day
++ Lower fund management fees compared to other platforms
An alternative to conventional savings
These platforms may not offer returns that are exciting as say, stocks or cryptocurrency. But they do help you beat inflation and squeeze out more returns from your savings without incurring too much risk, making them a worthy alternative to conventional savings instruments like fixed deposits.
This article was originally published in April 2021 and has been updated for freshness, accuracy and comprehensiveness.