Citi is joining up with the Singapore-based ride-hailing service Grab in a partnership that will allow people to burn credit card loyalty points in exchange for taxis – a world first.
Joel Yarbrough, Grab
It’s a more influential development than it might at first appear. For Citi, it’s a way to acquire customers and to increase the frequency with which they use their cards; for Grab, it’s a step towards a bigger ambition of becoming an Asean-wide payments platform, perhaps a southeast Asian Alipay.
“The way we think about the ride-sharing space is similar to how we think about the bill-payment space: recurring payment transactions,” says Harpreet Grewal, Asia-Pacific product director for Citi.
“People might take a couple of taxis every week. And what we’ve found is that when you put a card into a regular payment solution – like a standing instruction for a utility bill – in the long term those are more profitable than episodic spend. It leads to higher engagement on the account.”
Grab itself is one of the best-resourced start-ups ever to launch in Singapore, with more than $700 million raised since its 2012 start, and its ambitions go well beyond taxis.
“There isn’t a universal payments platform in southeast Asia, and we see huge potential in providing cashless payment options for the large proportion of southeast Asia that remains underbanked,” says Joel Yarbrough, Grab’s head of payments and commerce product.
Grab has already partnered with Indonesia’s Bank Mandiri, integrating the bank’s e-cash mobile wallet into the Grab app, and with Lippo Group, allowing customers to use the app to pay for serves across Lippo’s retail companies. It is also a partner of a platform it hopes to emulate, China’s Alipay, allowing Chinese tourists to use Alipay to pay for Grab rides in southeast Asia.
“With a rapidly growing middle class in southeast Asia, people will want to have an app they can use every day, whether for transport, or payments for basic transactions,” says Yarbrough.
The last part of that statement is the key: before long it would be no surprise to see utility bills and other forms of transport beyond taxis being handled through Grab, and ultimately for it to become more of a payment delivery channel than just a taxi service, in the same way that India’s Paytm started out as a way of recharging mobile prepaid accounts and has emerged as a clear competitor to the country’s biggest banks.
As with Paytm, the engine of this transformation is the smartphone: one in eight smartphone users in southeast Asia are already on the Grab platform, which is both a remarkable level of penetration for a new company and a clear illustration of the potential for further growth.
The idea of burning through loyalty points has a lot of appeal for individual consumers who often don’t keep track of them and in some cases let them expire, but Euromoney wonders whether it’s in a bank’s best interests to encourage those points to be used for something that costs the bank money.
Grewal argues that getting people engaged with their cards on this micro level is valuable. “We will offer it as a facility,” he says. “Not everybody wants to use their reward points like this: some people want to build up their balances and buy a holiday. We will give them the option.
“But when people do burn points for small amounts, they are much more engaged with us. They’re not dependent on a teller or a point of sale to do so. It’s the future of how we want to use the digital channel.”
The partnership will start in Singapore, then roll out to the other five markets Grab operates in: Indonesia, Thailand, Malaysia, Vietnam and the Philippines.