KUALA LUMPUR: After being overshadowed by other companies in the Tune group, Tune Money is reinventing itself as a “supermarket banker”, and is leveraging its association with AirAsia Bhd to reach the top of the league.   

Tune Money CEO Peter Miller has the grand ambitions of revolutionising the local banking scene with alternative banking products. In a recent exclusive interview with The Edge Financial Daily, he explains what supermarket banking is, and how he plans to get the group to the top of the ranks.

“Right now in the UK for example, if you see the [rankings] of the top 10 banks, only two or three would be recognisable as a big bank ... it might be HSBC, Natwest or something like that. Then would be Egg or Tesco Bank or Sainsbury’s Bank,” Miller said.

According to Miller, supermarket banking is not an entirely new concept in more developed economies like the UK and US, but is considered a revolutionary idea in this region.

Names like Tesco or Sainsbury’s are traditionally associated with consumer products and supermarkets, but these companies have since managed to establish themselves as leaders in the consumer banking scene there.

“There’s no reason why we shouldn’t see similar changes where people are willing to invest with brands they trust here [like AirAsia and Tune Money],” he said.

This is where Miller lays out his ambitious plans to one day lead Tune Money to become a leading consumer banking institution, starting with its recently relaunched prepaid-cum-loyalty programme card, the Big Card, a collaboration with AirAsia.

Tune Money, the Tune group and AirAsia are all controlled by Tan Sri Tony Fernandes. The aviation tycoon’s Tune Ventures Sdn Bhd owns a 44.83% stake in Tune Money, with the balance held by CIMB SI II Sdn Bhd (25%) and several individuals.

The secret behind Tesco’s meteoric success as both a consumer retailer and a bank was the analyses of its sales data through its customer loyalty programme, the Tesco Clubcard.

Tesco’s data analysis company, Dunnhumby, started to collect data from purchases made by customers which enabled it to construct marketing strategies and promotional campaigns.

Miller hopes the general insurance segment will result in steady cash flow for the group.

Key decisions by Tesco’s management team were mostly guided by this vital information on consumers’ actual buying behaviour.

The response to the data led the consumer giant to launch Tesco.com, Tesco Bank and venture into non-food segments such as clothing under the F&F Clothing at Tesco brand.

To emulate such a success would be no mean feat for Tune Money, but Miller believes that the Big Card may just be the opportunity it needs to get a strong foothold in the market.

In 2007, when Tune Money first introduced its prepaid card, it was greeted with a lukewarm response and scepticism.

Historically, as a prepaid card does not require one to sign up to a savings or current account with a bank, it was mainly targeted at the “un-bank” community, those without accounts. It also served as a travel wallet, an alternative to tedious travellers cheques and the risks of carrying too much cash while travelling abroad.

Prepaid cards were and are still not the norm in our local banking scene with only EON Bank, AmBank and Alliance Bank offering such products, while other banks prefer the traditional credit and debit cards.

The idea behind prepaid cards is a simple one — just load the card with cash and use it to withdraw cash or make purchases.

Once the card balance hits zero, no more money can be withdrawn or used for purchases. Essentially, these cards function like a prepaid mobile phone plan.

Since its introduction four years ago though, only 3,000 cards have been taken up.

This is a marked difference from its recent launch of the Big Card which has an average new subscriber rate of 1,000 applications a day, and with some 130,000 applications to date.

The Big Card was launched in mid-November last year and targets AirAsia customers, where it serves as a frequent flier or loyalty card.  

Its appeal, Miller noted, was based on the fact that everyone likes to travel.

He cited a study conducted by TAM Brazil, Brazil and Latin America’s largest airline, which found that 92% of points collected by flyers on its loyalty card programme went towards redeeming free flights.

Most loyalty card programmes are unattractive and have not changed much in the past decade, Miller said, adding that people spent so much money to accumulate points only to be able to redeem a toaster or something equally unexciting.

With the Big Card, after accumulating points, cardholders can opt to redeem all their points for flight tickets or use a combination of points and cash payments for those seats.  

“It is better for airlines to offer seats at discounted prices rather than fly those seats empty,” Miller elaborated.

Every RM2 spent at Tune Money’s partner merchants, online mall, AirAsia, AirAsia Megastore.com, AirAsia Red Tix, AirAsia Go.com and AirAsia Courier.com, is converted into one Biggie point.

The Big Card was launched in Indonesia in December 2011 and will be launched in Thailand this month.

However, the cards there do not have the prepaid function as legislation in these countries is not as advanced as Malaysia, Miller explained.

Instead, the group plans to partner with local merchants, vendors and even banks to convert whatever points their customers have accumulated into an opportunity to redeem them into AirAsia flight tickets.

Miller says Bank Negara Malaysia (BNM) has been most encouraging with its prepaid cards, as it was the right step towards fulfilling the central bank’s vision of Malaysia being a cashless society. He cited Hong Kong as an example, where less than 50% of transactions are undertaken with cash.

In his years as a consultant and in the insurance industry, Miller was always involved in new and alternative channels of distribution. He believes Tune Money has a huge potential that cannot be missed.

Miller joined Tune Money as CEO in September 2010 from CIMB Group, where he was head of insurance. Prior to that he was head of consumer banking at Southern Bank Bhd and had a five year stint in the AIA group.

“The changes which have taken place [in the financial industry] are visible for everyone to see. So I think when I compare Maybank [Malayan Banking Bhd] in 1995 and Maybank today, or even the corporate scene, it has vastly changed,” he said.

Miller truly believes that this is the right time and place to be involved in a venture such as Tune Money. If the group were established 10 years ago, he doubts it would have been as well received.

This, he mused, was aided by the advent of the digital age.

Much of Tune Money’s marketing has been done online via electronic direct marketing or simply put, through Facebook and Twitter. Not only does it maximise awareness, it does so at a very low cost.

Although this implies the group is targeting a younger demographic, Miller was quick to correct that it aims to target those who are “young at heart”, as those who are tech savvy does not just include the young.

Given Miller’s extensive 15-year career in insurance previously, the group aims to leverage on his experience and expertise in establishing a full fledged insurance arm with the acquisition of Onyx which will be finalised in the first half of 2012.

Currently, the group mostly deals in reinsurance through Tune In, its insurance holding company. It also has a partnership with AIA which also reinsures part of its risk and underwriting.

“If you look at the wider Tune family — Tune Talk, Tune Hotel, Tune Box, Queens Park Rangers, Caterham and KL Education Centre, all of these entities need insurance.

“We see insurance as very synergistic through this business,” he added.

Miller hopes that once the acquisition is completed, the general insurance segment will result in steady cash flow for the group.

Couple that with a steady flow of customers through the Big Card, Tune Money is well on its way to reach its ultimate goal of offering differentiated consumer financial services.

This article appeared in The Edge Financial Daily, February 14, 2012.