Banks in the region find small-ticket loans unviable, as the expenses necessary to simply verify a customer would hurt any financial upside. However, startups with a large user base—Grab claims 130 million downloads, while Gojek says its collection of apps have ~100 million cumulative downloads—can pull together a ‘long tail’ of small customers. This can then be presented to a bank at volume, offering the sort of scale where the economics work for the lending bank.
Both ride-hailing giants offer payments services in the style of Alibaba’s Alipay, with the goal being to combine this with other data from purchases to build customer profiles for financial services. Both have partnered with banks to do just this—Grab with Thailand’s Kasikorn, and Gojek with Singapore’s DBS—Southeast Asia’s largest bank—among others.
It’s a small world
It’s hard to avoid connections in Southeast Asia’s financial services ecosystem. Three startups in the space—Jirnexu, CompareAsiaGroup and C88 Financial Technologies—have raised capital from consumer credit giant Experian. Incidentally, Experian is an investor in Grab. [Image Mark Cruz/Unsplash]
For its fintech play to push it to profitability, however, will require significant scale. This won’t come easy given that GrabPay is one of half a dozen payments options in the region. Grab needs “wide payment penetration”, according to Wright. “I find it difficult to believe it can do that in Southeast Asia, where there are more dedicated players. Data on people’s taxi usage alone doesn’t seem very useful.”
But even as it figures out a path to profitability, Grab has understood the importance of maintaining a healthy equation with those in power. Gojek and Grab’s tit-for-tat have seen them woo, and be wooed by, governments in the same way they battle for consumers and investors.
In Indonesia—the region’s key battleground—the government congratulated Gojek on reaching a $10 billion valuation, and rumours persist that CEO Nadiem Makarim has been offered a cabinet role. Yet, Widodo raised eyebrows this summer when he referred to Singapore-based Grab as “Indonesia’s fifth unicorn.” Tellingly, that endorsement came after Son and Grab’s $2 billion investment pledge.
SoftBank chairman Masayoshi Son (fourth from right) met with Indonesian President Joko Widodo (center) alongside Grab CEO Anthony Tan (third from right) and Tokopedia CEO William Tanuwijaya (third from left) as part of a pledge to invest $2 billion into the country
“Today, Grab wants to be the connecting part for the consumer ecosystem in Southeast Asia,” said former EasyTaxi executive Li, who runs startup consulting firm Momentum Works in Singapore. “People need to see you as a reliable partner.” Social impact is one aspect of that, but a large part of reliability is a solid business that will allow a company to last.
It is common to hear talk that Grab has become “too big to fail” in Southeast Asia, such is the vast expanse of its business. And while its social impact report may give the sense that, irrespective of its sustainability, someone will be there to bail it, there’s a more mundane, but realistic, answer. Grab will almost certainly have to pare down spending at some point.