Q&A: GrabPay on the road for expansion across Asean

Grab wants to build a cashless economy across 10 Asean countries. Reuben Lai, the head of financial services at the ride-hailing firm, lays out his roadmap for FinanceAsia readers.

Singapore-based ride-hailing firm Grab is in talks with regulators about securing licenses to provide financial services in all 10 Asean countries, up from the six country licenses it bagged in 2018, according to a senior executive.

The move is part of Grab's bid for dominance as the go-to internet application for everyday services, from transport to grocery deliveries, across the world’s fastest-growing internet region. 

“2019 is the year that we want to cement our position as the Asean wallet,” said Reuben Lai, senior managing director of Grab Financial, the business unit that houses payments, rewards and broader financial services.

Widespread adoption of its digital payment solution, called GrabPay, will be key to the success of the nascent superapp.

GrabPay users tend to spend roughly twice as much time and money on Grab's platform. And crucial to Grab’s plans to diversify beyond ride-hailing, GrabPay users are 30% more likely to use multiple services.

GrabPay is bulking up rapidly. While the unit is still in the red, in the last six months it has grown about 3.5 times in terms of monthly active users and about 3.2 times total payment volume, Lai said in an interview with FinanceAsia.

Grab's Asean expansion comes as competition in the region heats up.

Internet companies are rushing to enter Southeast Asia’s markets in a frantic land grab. Indonesian rival Go-Jek, whose own digital wallet is dubbed Go-Pay, launched a regional expansion in May, 2018. Payments providers from China such as Ant Financial's Alipay, Tencent's Wechat Pay are also muscling in on the action. And ride-hailing firm Didi Chuxing expanded its financial services across China on January 2.

Not to be outdone, the region’s powerful conglomerates are launching their own digital wallets to smooth payments of their own products and promote loyalty to their brands. AirAsia launched BigPay in Malaysia. Smaller fintechs are mushrooming across the region as well.

Governments are watching this hubbub of activity carefully. Generally, they want to promote financial inclusion and are keenly aware that the public’s lack of acceptance of digital payments systems is a hindrance to economic growth. The internet economy in Southeast Asia’s six largest economies could exceed $240 billion by 2025, according to a report by Google and Singaporean wealth fund Temasek. 

Regulators have granted licences to newcomers and opened up real-time payments networks in recent years.

“Regulators are going to start opening [real time payments networks] up to fintechs ... and that would dramatically lower our cost to serve customers,” said Lai. 

Still, adoption of digital wallets remains low. Less than one in two internet users in Southeast Asia use digital payment services, a Google Survey in the second quarter of 2018 suggested. This is in sharp contrast with China, where payments over Alipay and WeChat Pay are ubiquitous to the point where consumers have difficulty using cash.

The next step to boost acceptance in Southeast Asia could be interoperability (powered by open APIs), where systems and organisations work seamlessly together, based on common standards. Hong Kong and Australia have already adopted an open banking approach.


Digital payments have massive growth potential in Asia as much of the region's economy is still cash-based. Only 27% of adults in Asia's emerging markets have a bank account, according to the World Bank.

While there are a plethora of digital payments solutions in Southeast Asia it is increasingly apparent that scale will be critical to diversification into higher margin financial products such as lending.

Only the largest players have the captive audiences, networks to allow easy top-ups and collection of repayments, as well as data troves to assess risk adequately. 

2019 could start to see consolidation in the payments space.

"The smaller players will find it really hard to survive because scale is super-important in fintech," said Lai.

Grab is already linking up with banks and conglomerates to bolster its user base and expertise. In October it partnered with Booking Holdings, so that GrabPay users can easily pay for travel tickets from their e-wallet. It also teamed up with the Indonesian conglomerate, the Lippo Group, to integrate payments solutions. 

Scale is particularly important in terms of raising capital to support the build-out of applications before they achieve a critical mass among users. Investors swarm to the largest, most successful players which they believe enjoy network effects and are most likely to become profitable.

Among Southeast Asia’s internet startups, Grab took the lion’s share of capital in 2018. It raised more than $6 billion and became the first Southeast Asian decacorn, a privately held company valued at over $10 billion.

Founded in 2012, Grab made its first foray into fintech through car leasing, making it affordable for its drivers to own their cars. About 130 million people have downloaded the Grab app and 8.5 million micro-entrepreneurs use its platform.

Having first been made available in Singapore, the mobile wallet service has since expanded to the Philippines, Vietnam, Thailand, Malaysia and the region's most populous country, Indonesia.

Once Grab has acquired in-country payments licences it is well-positioned to win licences for other, higher-margin financial products, such as insurance and loans. Right now, Grab uses the balance sheet of banking partners such as Japan’s Credit Saison but ultimately it is pushing towards lending off its own balance sheet.

Merchant lending can be done without a licence and Grab began to offer loans online to food merchants in November. But other forms of loans need a specific licence. Also in November, it launched wallet-to-wallet remittances after winning licences around Asean.

Lai was involved in Grab's start in fintech, helping drivers fund the purchase of mobile telephones and their cars. In the interview below with FinanceAsia, Lai details GrabPay’s swift growth. 

Mirroring the entrepreneurial spirit of the group, in Lai's four years at Grab he has launched four new businesses, Grab Financial being the latest one in March 2018. Before Grab, Lai was director of strategy and business development at Walt Disney with stints at consulting firm Bain & Company and asset management company Value Partners.

The following extracts have been edited for brevity and clarity and to fit our house style. Some of the questions and answers have also been reordered.


Q: What were the big growth drivers in 2018 and will they continue into 2019?

A: It is definitely full throttle ahead but we are just getting started.

There is a huge macro opportunity with a growing middle class that needs capital to start and grow their businesses, buy homes for the first time, pay for their kids’ education, and get insurance. Yet this middle class is underserved by traditional financial institutions and banks.

Another driver of growth is the huge unprecedented move by the governments in Asean towards cashless economies. 

We were fortunate in 2018 to be able to get licences across the largest six Asean countries and secure strong bank partners and retail partners like BDO, Maybank, Kasikorn Bank.

On the back of it, we have already grown quite a lot in terms of Monthly Active Users (MAU) and Total Payment Volume (TPV). In terms of MAUs we have grown about 3.5 times [and with] TPV [it's] about 3.2 times in the last six months. 

Q: Will you roll out higher-margin businesses in the six Asean markets where you already have licences in 2019?

A: 2019 is the year that we want to cement our position as the Asean wallet. And we will definitely be executing hard in the Asean 6 to make sure that we roll out services and really penetrate the market. Having said that, Asean is not just six countries, it is 10 countries, so we will definitely be looking to find our way into the rest of Asean.

Q: Have you already applied for any other licences?

A: We are in talks with partners, governments in every single Asean country.

Q: What is your target for number of users?

A: 100 million. In Asean there are roughly 600 million people. Let’s say half of them are either too old or too young, and some of them are already well-banked. So 100 million is 50% of the remaining 200 million. 

Q: How will get you there?

A: Consumers come to us multiple times a week. They transact on our platform across multiple services. Because of that, we have a lot of insights that we can give to consumers; relevant products and services such as lending or online payments or microinsurance products that will cater to their needs. And then there is the scale and reach of our platform. What merchants really want is more demand to lower their costs.

That drives a virtuous cycle. The more GrabPay merchants there are, the more [there are] consumers who want to transact. That feeds us with more insights about consumers, which then can allow the merchants to push them more targeted offers resulting in a virtuous cycle.

Reuben Lai: eye on Asean

Q: When do you expect to hit that target of 100 million?

A: The next five years.

Q: How will you keep costs down as you grow across Asean?

A: We have transformed into an everyday app where we have transport, food and delivery services and we are adding more new services on top. What it means then is that for every customer or merchant that we acquire, we amortise their cost over multiple services. Compare that to a single modality player where they can only amortise it one way. That dramatically reduces our customer acquisition costs.

Q: Are merchants willing to pay Merchant Discount Rate (MDR) costs?

A: When we launched in Malaysia earlier this year, we started to sign up merchants. It turned out that it was really easy [to do]. They see our platform as an aggregation of high-quality consumers who are tech-savvy, willing to spend, and young. A lot of them wanted to get access to cashless payments because that was what this new segment of customers wanted. But at the same time, they found credit card transactions tedious to handle because every time you swipe the card there is a lot of stapling of paper.

And with [greater] visibility of cashflows we are able to lend them money and facilitate their growth. Because of that, the merchants were happy to come on board to say: “OK fine, charge me less than a credit card for sure, but we are happy to pay an MDR because we get access to your customers and we get access to financial services that are easy to sign up for.

Q: How much data do you need to feel comfortable lending?

A: Data is important - a single source of data is inadequate. That is where the partnerships that we have really come in. Working with our partners, with the consent of the merchants, we get access to part of their data. And then working with the SMEs we are able to then lend them microloans at short tenors.

We do it in small amounts at the start and then we can increase it over time. So we can vary the interest rates.

We built our own credit scoring model, we have our own social graphs, we look at cash flows and we look at various other factors as well.

We try to [reduce] risk through frequent micro-repayments as well and our definitions of non-performing loans (NPLs) are in terms of days that are late rather than 30 days.

Q: What have you learnt from your pilot schemes around the region with drivers?

A: We call them pilots but we have scaled it up to quite a big percentage of our driver base.

In every one of these trials, we asked them questions. “What are you borrowing money for?” They were using it to repay existing loans from loan sharks; to upgrade their equipment like mobile telephones so that they can drive better; to pay for their kids’ education; and, fourth, to refurbish or maintain their vehicles.

We are in the midst of applying for all of our lending licences across Southeast Asia and we feel pretty confident that we should be able to get a few of them pretty soon and have access to Asean by next year.

We started to lend to our full merchants in the last month or so, and realised that it was a lot harder to lend to SMEs. I guess we were quite naïve thinking [that] if we were to offer people money they would take it.

Q: How is your relationship with Lippo's Ovo driving growth in Indonesia? 

A: Ovo is part of the Lippo Group and Lippo has a huge modern trade presence across the country.  Now Ovopay is made available at [major e-commerce portal] Tokopedia and that has been massive. Literally it just almost doubled our wallets overnight and so we love their model of combination -- of bank partnerships, offline retail, online retail -- into an ecosystem and that is what we want to do across Southeast Asia.

Q: Where do you see the most high-traffic cross-border flows for Grab remittance products? 

A: Singapore-Philippines is a great corridor; Singapore-Malaysia is another super one. Malaysia-Singapore to Indonesia, there is a lot of flow there as well. The good news is that it is pretty spread out across Southeast Asia.

The beauty about the Grab plan is that after you remit, the user can actually use it for their day-to-day expenses whether that is transportation, buying food or shopping online. And that really adds value to the life of the consumer because they don’t need to spend extra effort, time or money to go and withdraw. 

Q: What makes you an appropriate vehicle for the remittance business?

A: We have to be very, very careful [about the potential for] money laundering and fraud. We will be building up our [artifical intelligence] systems to monitor that and to prepare the necessary offline measures as well. It is particularly tricky in this part of the world where identity is not so well established.

Q: How would you summarise regulators' attitude towards fintech in 2018? 

A: In 2018 regulators embraced fintech and saw it as a necessary investment to increase the efficiency of the economy and to increase financial inclusion. Going into 2019, we will see more opening up of real-time payment networks platforms; things like the FAST Platform in Singapore, PromptPay in Thailand, PayNet in Malaysia. I believe that the regulators are going to start opening them up to fintechs ... and that would dramatically lower our cost to serve customers.

Peeking a little further into the future, I am curious about the developments of open banking in Hong Kong and Australia and how that would impact Southeast Asia. We haven’t seen anything happening yet [in the regions], but we are keeping our eyes peeled.

Q: Do you think there will be consolidation next year in fintech?

A: The smaller players will find it hard to survive because scale is super-important in fintech.

Q: Do you see more partnerships with your investors?

A: Yes, for sure. We have been blessed to have Kasikorn Bank come on board and they have been incredibly supportive. We hope to launch a few joint products over the course of the next few months.

Kasikorn was one of our first partners in transport when no bank would talk to us ... And I remember these guys who bet on us when we were nobody, and they just kept growing with us and believing in us.


This story has been updated to correct the number of Grab app downloads and the number of micro-entrepreneurs who use its platform

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