Grab is one of a cluster of fintechs that are revolutionizing grass-roots financial services in Asia. While Ant Financial and Tencent’s WeChat have disrupted China and Paytm leads a similar march in India, in southeast Asia, Grab and Indonesia’s Go-Jek are the standouts, launching dedicated financial services businesses off the back of ride-sharing platforms.
Grab was formed in 2012 by a group of friends irritated about how hard it was to get a taxi in Malaysia. It started out as a local equivalent of Uber (and went on to take over Uber’s business in southeast Asia last year) and remains first and foremost a transportation network, empowering individual drivers of cars and, particularly in Indonesia, motorbikes, with a strong financial inclusion objective.
In the course of taking on the region’s mobility problems, “we discovered that southeast Asia was really underserved in terms of financial services,” explains Reuben Lai, who runs the Grab Financial division that was launched last year.
Grab had had to set up over a million bank accounts for its drivers so it could deposit money into their accounts.
“At first we didn’t understand why,” Lai says. “They said they just didn’t have bank accounts, so we had to team up with the banks.”
Additionally, 90% of the drivers didn’t have credit cards or insurance.
“So they didn’t have access to the traditional products that people in developed countries take for granted. We realized that if we could use technology to solve this financial services gap, we could enable social mobility for the masses.”
Whether through being licensed in its own right or through local partners, Grab Financial has e-money licences in the six biggest Asean markets. It has a lot of momentum to get started: 140 million people have downloaded the Grab app and there are nine million drivers and agents in the network. One year in, Grab already has 600,000 online and offline merchants and is growing fast.
It has been clear for some years that Grab had aspirations beyond transport. A credit card tie-up with Citi was an early example; now it partners with institutions across Asia including UOB, Maybank and BDO Unibank, as well as Mastercard and Credit Saison. These are taking Grab out of rudimentary payments and into products that look a lot more like banking.
For example, Grab is now a lender, not just in terms of loans to drivers but also working capital loans to small businesses in Singapore. In March, the joint venture with Credit Saison launched Pay Later, a post-paid and instalment payment service, initially in Singapore. Through another joint venture, with Zhong An, Grab launched a digital insurance marketplace in April. One product, for prolonged medical leave, is offered through a partnership with Chubb.
“There is a huge financing gap for small and medium-sized enterprises in Singapore,” says Lai. “We know, and the banks know, they are hard to serve,” partly because of the availability of data to do credit scoring and partly the cost of service for small accounts.
Grab sees an advantage. Lai says its cost of customer acquisition is a 10th of that of the banks, as is the retention cost. But for the moment the model is mainly partnership.
“Banks and other financial institutions are able to leverage our data to roll out products,” he says. “Our message to banks in the region is: we are here to partner.”
But when Lai describes the endgame, it is certainly enough to make banks in the region nervous: “By the end of this year we want to be the most attractive platform for small businesses to tap payments services, unlock earnings potential or get access to microfinancing.”
Lai says, longer term, “we have a vision to be the Asean wallet.”
That raises the next big question: regulation. Despite common complaints from banks that fintechs have it too easy, Lai says that “regulation is extremely tough in southeast Asia.” Unlike Chinese fintechs that deal with one regulator, Grab deals with 10 different countries.
“We work very closely with them. Quite frankly not all regulations are black and white and well spelled out.”
Grab helps regulators shape policies, he says. “They are strict because they are trying to protect consumers and we totally respect that.”
Often the licence in question will be held by a local bank partner.
He rejects the claim that fintechs have it easy.
“Each party has their own challenges and advantages,” he says. “Likewise, we can say that banks have regulations to protect consumers, but that creates barriers to entry to fintech players. It cuts both ways.”
The financial arm is not yet profitable. Lai calls it “an investment phase.” He won’t be drawn on a time frame for profitability.
“There is so much to be done in southeast Asia and we intend to make a meaningful dent to the financial services market in a very short space of time,” he says.