Grab is Southeast Asia’s leading consumer technology platform, its first decacorn (valued above $10 billion), and among the first big tech companies from the region to be publicly listed in New York.
Now that it is established across eight Southeast Asian markets, one focus of its fintech business, GrabFin, is on how the app can promote cross-border usage, says Wenbin Wong, head of GrabFin Singapore. GrabFin operates payments, lending, insurance and other financial products at Grab.
Financial services have always been important to Grab. The company developed in-app payments to enable people to go cashless when booking rides and ordering food deliveries. Then it provided mobile payments to grow user engagement, followed by insurance and credit services: for drivers, for merchants using Grab’s e-commerce facilities, and for riders.
Today Grab is running pilots using stablecoins or other digital assets for users to top up their GrabPay wallet.
“Travel is back” after the Covid pandemic, Wong told DigFin. “We see how innovation can make it cheaper and easier to pay across markets. Financial innovation means we can create more options to pay and pass those savings on to our users.”
Regional rider
Of Asia’s ride-hailing platforms, Grab is the most regional. It has been so from the start. It was founded in Malaysia in 2012 inspired by Uber, which was then expanding to China, India and Southeast Asia. Grab’s strategy to take on the US pioneer was to aggressively expand across the region and localize the experience.
Singapore and Malaysia are too small to support the scaling requirements of a global tech platform, so it’s no surprise that Grab had to regionalize from the outset. It lacked the deep domestic home market of its Asian peers (Didi in China, Ola in India, Go-Jek in Indonesia).
But operating in eight countries brought operational headaches that tech could only partially solve. Perhaps the biggest was payments. In the US, Uber’s game-changing innovation had been to make the rider’s journey seamless: the payment was embedded in the hailing process. That was because most people in the US have a credit card.
Not so in Southeast Asia, where cash is king even today. Grab had to enable smooth ride hailing that ended in a cash transaction. Doing so gave it an edge against Uber, which stuck to credit cards.
From cash to QRs
Grab could hold its own against Uber, but to deliver the knockout blow would require bigger changes. The tipping point came as more Southeast Asian governments rolled out faster payment systems domestically. Now riders and drivers could use an e-wallet to handle mobile payments via a QR code, even if they lacked a bank account.
“We saw the power of the e-wallet to improve our transport business even as we were starting out,” Wong said. “We invested in bringing forward more wallet use cases.”
Grab first provided drivers with e-wallets, so they could load it with credits to accept cash rides. In places where drivers lacked bank accounts, notably Indonesia, Grab helped them apply for accounts. “This was part of our driver-partner onboarding, so they can cash out their earnings from Grab,” Wong said. The company also let merchants use the app to accept payments for food-delivery orders.
This broadened the number of people who could use the Grab app, while Uber’s numbers remained limited to credit-card users. Uber decided not to invest in similar capabilities: for its global business, sticking to cards was operationally efficient. In 2018 Uber sold its Southeast Asia business to Grab, reportedly for a hefty 27.5 percent stake in Grab.
Digital banking
Another turning point for Grab’s fintech ambitions was digital banking. As monetary authorities across the region considered purely digital bank licenses, including in Singapore, “We imagined the possibilities to amplify the impact of our fintech capabilities,” Wong said.
Singapore is overbanked so it made no sense to operate a bank just in that market. Grab saw it could create operational scale if it won more than just one. Although these licenses are country-specific, it could build the businesses on top of a single tech stack.
Grab won banking licenses in Malaysia and Indonesia too. It now operates GSX in Singapore, a joint venture with SingTel, which in turn runs GX Bank in Malaysia. Separately Grab runs Super Bank in Indonesia, along with SingTel and Korea’s Kakao Bank.
Grab didn’t ultimately seek a license in Thailand, unlike some of its digital-bank competitors in Singapore (such as Ant Group and SeaMoney). But Kakao Bank’s CEO recently took a board seat on Grab, and the Korean fintech is part of a consortium, along with SCBX and Tencent’s WeBank, bidding for one of three virtual-bank licenses on offer. (Wong declined to comment on this, as he is only responsible for GrabFin’s work in Singapore; the only bank entity that he collaborates with directly is GSX.)
The banks are separate entities, with their own executive officers and operations. Grab’s team cooperates with them but from arm’s length. But sometimes bank features are embedded within the Grab app: for example, users can view their bank balances there.
These banks will have non-Grab related customers and business too, but by including Grab users – drivers, riders, merchants – these banks can get a head start on growing their customer numbers. In turn, Grab users enjoy seamless bank features such as paying for Grab’s services using their bank balance directly (and garnering Grab rewards).
Cross-border payments
Collaborating with GSX is only one aspect of GrabFin’s work today. GrabFin continues to roll out features to support its various categories of users. For example, a current focus is helping restaurants attract foot traffic, as they move beyond the Covid pandemic. Grab has a clear view of restaurant cashflows and its credit scoring app can price a loan accordingly, which helps merchants as they pivot their businesses.
The post-pandemic era brings new opportunities within Southeast Asia as people travel more and businesses seek more cross-border opportunities. Wong heads GrabFin for Singapore only, but his business unit is naturally exploring payment solutions for operating regionally – as befits a technology company born with regional DNA. And where payments go, other financial services often follow.
Grab is already partnered with Mastercard to use credit cards to top up GrabPay e-wallet balances, enabling Singaporean Grab users to use Mastercard rails to pay for things in neighboring countries in Singapore dollars. It’s a similar outcome as if people used their domestic PayNow wallet.
But this only works for people with credit cards – which is fine for Singapore, where cards are common, but it won’t be a comprehensive solution for users elsewhere. (And GrabFin no longer develops card-related products, having transferred these projects to the various digital banks, which are better suited as card issuers and merchant acquirers.)
Tokenization
Payments remain core to GrabFin. Wong says last year the company began to work with central banks on pilots using stablecoins or central-bank digital currencies to enable payments.
“We’re trying to put our R&D into real-world applications, as fast as we can,” Wong said. “We’ll play to our strengths,” which he says means fostering high-frequency transactions among its user groups rather than pure e-commerce or corporate B2B payments.
For example, Grab wants to improve the experience for travelers into the region who use Grab services to get around, dine, and make payments, especially if they wish to use wallets from their home countries.
Working with tokens as opposed to bank accounts brings plenty of new challenges. Security and KYC is one. Another is the cost of transacting via blockchain, with its high gas fees. A third challenge is resilience should a global blockchain such as Ethereum suffer from an outage.
“For tokenized payments to gain broader acceptance, it needs to be cheaper, more robust, and resilient,” Wong said. When this happens, blockchain-enabled payments will gain broader acceptance. Once it is at the tipping point, a platform like Grab can quickly bring in a mass of users – and drive Southeast Asia’s cross-border payments into the fast lane.
