Corporate maneuvering

Grab Financial is raising $300 million for its spin-off: sources

In a move that has been likened to that of Ant Financial, the Southeast Asian fintech group is busy raising the target amount and separating its business from its parent company, FinanceAsia has learnt.

Grab Financial, the business unit of Grab’s payments, rewards and broader financial services, is raising up to $300 million to prepare the brand to run independently, executives close the matter have informed FinanceAsia.

It is not clear at this stage if the $300 million funding will be sourced from outside investment, a cash injection from Grab or a mixture of both. A spokeswoman for Grab Financial declined to comment on the news.

The news comes on the coattails of regional rival Gojek just completing $1.2 billion fundraising for its expansion, according to Bloomberg. The proceeds will be used, in large part, to take on Grab.

A spin off of the financial services business has been openly discussed for some time. In a previous interview with FinanceAsia, Ooi Huey Tyng, a managing director at GrabPay, which is the payment arm of Grab Financial, admitted that Grab, the parent company, was actively considering it. However, the size of the fundraising to achieving it has not previously been made public. 

Grab itself has just secured $856 million from strategic Japanese investor Mitsubishi UFJ Financial Group and TIS early this month. In a statement, Grab said the investment in early March will “go towards creating accessible and affordable financial services for Southeast Asia to boost financial inclusion in the region”.

Meanwhile, Grab’s financial arm is attempting to build a bigger presence in Southeast Asia by applying for one of the five digital banking licences in Singapore, which is expected to issue by mid-2020. Grab partnered with Singtel to apply for the licence and will take 60% stake in the consortium.

“It looks like Grab is trying to copy what Alibaba is doing to Ant Financial,” one Hong Kong-based fund manager commented referring to Alibaba’s relationship with the Chinese payments business.

Most people agreed that fintech is the future, but few know exactly how that will manifest. Ant Financial has undoubtedly set a good example – becoming a platform or a wallet provider that people access on daily basis.

Grab Financial seems to be on the right track. With a critical mass of users, it has begun to scale back the subsidies that its payments app gives to merchants since last year.

“We have reached a scale where we can monetise our data and monetise our user base,” Ooi Huey told FinanceAsia in November last year. Grab’s growing platform also makes higher-margin financial services a viable business for the firm. Grab Financial is building out its insurance and lending services as it gathers financial licences across Southeast Asia.

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