George Yang, Author at Goody Feed

If you're confused about the Chocolate Finance instant withdrawal saga and wonder why some claim Singapore finance influencers might have contributed to this, keep reading to decide for yourself! Or if you prefer to watch a video about this instead, here's one we've done: https://www.youtube.com/watch?vVIofzw5VBfA&listPLoa9nNa48ZVVgUOs4vYirCdsJQpkbUe51 Still prefer to read? Here goes. How Banks Actually Work Before diving into the Chocolate Finance situation, you need to understand how banks earn money. When we deposit cash into a bank account, the teller doesn't just store our cash in a safe to return when we want to withdraw. Instead, banks use our money to make more money. They do this through various methods. One way is by acting as a "legal loan shark" – lending money to others and collecting interest. Another method is investing the money to generate returns. However, banks must keep some cash on hand for customer withdrawals. What Is a Bank Run? A bank run happens when suddenly many people want to withdraw cash from a bank, but the bank doesn't have enough cash available. This can cripple a bank's operations. That's why bank runs are dangerous. We shouldn't spread fake news about banks as it may trigger a bank run. What Is Chocolate Finance? Here's the key point: Chocolate Finance is NOT a bank. That's why I explained bank runs in detail. If it's not a bank, no one can cause it to have a bank run. So reports about it experiencing a bank run are incorrect. You might have read about Chocolate Finance halting instant withdrawals due to many people withdrawing funds. But this isn't a bank run. Unlike banks that use your money however they want, Chocolate Finance operates differently. Chocolate Finance is a platform providing online robo-advisory services. Now, you're confused. How Chocolate Finance Works Let me simplify how it works. Imagine Chocolate Finance is a person named Tan Zhi Wei. Three friends each have $10,000 and want to earn more from their money. Bank interest rates are very low, and they're afraid to invest in stocks because of market volatility. So they give $10,000 each to Tan Zhi Wei. He invests their money in a safe portfolio and promises a 3.3% return. Even if the portfolio only earns 1%, he tops it up to 3.3% for them. If the portfolio performs well and earns 10%, Tan Zhi Wei keeps the difference (6.7%). That's essentially what Chocolate Finance does. They promise fixed returns on money you give them to invest in relatively safe instruments. Nothing is 100% safe, of course. Why Was It Popular? Local finance YouTubers widely recommended Chocolate Finance because its interest rate, initially, was high, at 4.5%. Typically, for such high returns, you'd need to lock your money with a fund manager for a fixed period. But Chocolate Finance allowed withdrawals anytime. You could make instant withdrawals up to $20,000 per day! It functioned like a bank savings account but with better returns than a fixed deposit. They even offered a debit card for the account, making it feel just like a savings account. But remember: it's not a bank, and the account isn't a savings account. Now, ask any investor what superpower they wish for, and many will say "holding power." Having the financial and emotional strength to maintain a well-selected portfolio for a long period helps investors ride out market fluctuations. Markets generally trend upward over time. This is partly why some investment tools require fixed timeframes before withdrawal. These requirements help investors stay committed long enough to see potential gains. This is why it's attractive: high returns with instant withdrawal? That's a wet dream for every investor. How Instant Withdrawals Worked So how could Chocolate Finance offer good returns yet allow instant withdrawals? Simple: They set aside cash for people to withdraw. If that wasn't enough, they'd have to sell the customer's investments to fund the withdrawal. Selling investments typically takes a few working days. If everything worked normally, we wouldn't hear about Chocolate Finance. But like many things in life, something went wrong. The AXS Incident That Started Everything It all began on 11 February, when Chocolate Finance partnered with HeyMax to let its debit card earn miles. Miles are reward points redeemable for plane tickets or upgrades. You typically earn about one mile per dollar spent (usually more to stay competitive). Most cards exclude bill payments from earning miles, particularly AXS payments, since AXS handles various bills. But Chocolate Finance initially allowed it – and chaos followed. In early March (around 4 or 5 March), Chocolate Finance disabled its debit card for AXS payment, prompting complaints in online forums. Allegedly, Chocolate Finance first indicated on its website that AXS wanted to stop accepting their debit card. Later, reports suggested Chocolate Finance itself wanted to disallow AXS payments. The Finance Influencer Effect This prompted two popular local finance YouTubers who had promoted Chocolate Finance to make a video about the situation. They announced they were withdrawing all their cash from Chocolate Finance. Their reasons included: The AXS issue Personal issues with Chocolate Finance (which they didn't disclose) Chocolate Finance's reduced returns (from 4.5% to 3.3%) Travel and finance websites also wrote about this development. The Instant Withdrawal Suspension Things really hit the fan on 10 March, when Chocolate Finance suspended instant withdrawals. The CEO immediately explained what happened. He said people were gaming the system by accumulating miles through AXS payments. This practice made the program unsustainable, leading to the AXS payment stoppage. Regarding why it was initially suggested that AXS initiated the suspension rather than Chocolate Finance, the CEO admitted a communication error had occurred. https://www.youtube.com/watch?vMj-rImkNPv0 If you're confused, let's our earlier example: If I want my $10,000 back, Tan Zhi Wei must sell off the investments he made with my money. This process takes two working days for the money to reach his account. But instead of making me wait, Tan Zhi Wei could give me $10,000 from his own savings first. Chocolate Finance did something similar with their instant withdrawal program. When many people request instant withdrawals simultaneously, they can't fulfill them all immediately. Just like if two friends asked Tan Zhi Wei for their money back at once, he might not have enough in savings to pay both immediately. What's the Latest Chocolate Finance has recently adjusted its debit card limits and implemented certain restrictions. Initially, the company imposed a temporary spending limit of S$250 per transaction to manage liquidity, but this has now been increased to S$1,000. Withdrawal processing times have since been revised, with funds now typically taking three to six business days to be transferred, instead of the previously announced three to ten working days. At the time of writing, instant withdrawals remain unavailable, but Chocolate Finance has indicated that this feature will return soon.