A vast population in Southeast Asia remains under-banked and uninsured. Grab Financial Group senior managing director Reuben Lai speaks of the opportunities and challenges in giving this hitherto underserved audience access to a wide suite of finance products and services. Excerpts from an interview below.
You have recently expanded the offering of consumer facing financial products under the ‘Thrive With Grab’ initiative. Could you give us an overview of how and why you arrived at this suite of products – micro investments, third party loans and buy now pay later products for ecommerce?
Yes, but before getting into Thrive with Grab, some context is important. In 2019, we focused on merchants by launching the ‘Grow with Grab’ roadmap. The focus was on serving merchants with financing tools and launching our insurance business.
This year, we sharpened our consumer focus with ‘Thrive with Grab’. It vastly expands our consumer ecosystem so we can serve them better. To do this, we are offering micro-transaction-based financial services. These include our first retail wealth management product, convenient finance management tools and access to financing products from leading global institutions.
We developed this suite of products because we want to empower users to build their wealth, manage finances and protect what they value.
What sort of an impact did the COVID-19 pandemic have on the decision to expand your range of financial products? What are some of the pain points in people’s lives that these products address or resolve?
These products and services were not designed in response to the pandemic. We had been working on developing ‘Thrive with Grab’ for quite some time. We had previously identified that more could be done to address the unmet financial needs of Southeast Asia.
According to a report from Google Temasek and Bain & Company called ‘Fulfilling its promise – the future of Southeast Asia’s digital financial services’, over 70 per cent of the population is underbanked. Millions of small and medium-sized enterprises (SMEs) face large funding gaps.
Addressing these issues is at the heart of our broader approach to developing digital financial services. COVID-19 has simply accelerated our urgency in helping consumers and businesses get closer to achieving their financial goals and adapting to the ‘new normal’.
That said, for COVID-19 specifically, we’ve worked on alleviating some of the pressures facing small businesses through our Small Business Booster Programme, announced in June.
During the pandemic, many merchants turned to social media to sell their products, but lacked an easy way to receive payments. We created Remote GrabPay Link (RPL) – allowing merchants to sell on social media through a URL that they can send to customers to make a payment. Within the first few weeks of launch in Singapore and Malaysia in April 2020, we saw over 2,500 merchant-partners using this solution.
We also help offline businesses to go online by partnering e-commerce solution providers in Singapore, which helps merchants easily set up online stores with GrabPay Integration.
Lastly, we are driving foot traffic to businesses with Merchant Discovery. Grab users can easily find relevant stores in close proximity to them, via the Nearby Merchants widget on the Grab app.
Even as we create new solutions, we want to complement our products with financial literacy campaigns. This will empower Southeast Asians to take control of their financial health during and beyond this period.
Why has Grab launched micro-versions of some of its financial services, such as insurance and investments? Why fractionalise financial services in this way?
Besides being crucial to our strategy, we do this to make our products more accessible and affordable. We’ve seen fractionalising begin to bear fruit, with over 13 million paid-for insurance policies issued via GrabInsure since April 2019 – it currently operates in Singapore, Malaysia and Indonesia. We are now one of the largest digital insurance distributors in Southeast Asia for our insurance partner, Chubb.
We are helping democratise access to wealth management and protection by turning insurance and investments into micro products for an audience who previously found such products inaccessible. For example, many investment funds usually require a minimum starting amount. Fees can be high and there is a lot of fine print to navigate. Our AutoInvest product allows users to start with $1. The money that users set aside is invested into low-risk liquid fixed income and money market funds, allowing users to affordably build an investing habit by spending on eligible Grab services.
What are your expectations when it comes to adoption? Considering your previous experience with insurance, are there any benchmarks that you are aiming for, which you would like to discuss?
It’s still early days since we just launched ‘Thrive with Grab’. But we know there is real demand for our consumer financial services. We conducted extensive internal primary research to truly understand our users’ needs and the gaps that they are facing.
‘Grow with Grab’ provides a promising picture. Since its launch last year, we’ve strengthened our business significantly. Grab Financial Group (GFG) is today one of the fastest-growing fintech lenders by disbursal. Together with our Indonesian payments partner, OVO, we had nearly 400,000 outstanding loans and financing solutions across consumers, driver- and merchant-partners in Q1 2020.
We expanded SME lending to Singapore, Malaysia, Thailand and the Philippines to support our food and retail merchants with working capital loans.
We hope this success can continue with ‘Thrive with Grab’. We expect demand for our financial services to keep growing as businesses come online and our customers and partners continue to seek low-risk, affordable and accessible digital solutions to fulfil their everyday needs.
What sort of a role has partnerships with financial service providers played in structuring this offering?
Our partnerships with banks and other financial institutions have always played a key role in helping us develop products and solutions that serve the financial needs of Southeast Asians.
We build strong local financial institution partnerships because they help us enable faster go-to-market timelines, with an improved product offering with our collective expertise. We offer preferential rates for financial products and services, which ultimately brings even more benefits to our users.
Partnerships also make sense in a region as diverse as Southeast Asia with different local market conditions. We help our partners get a broader set of customers with our scale. For example, our partnership with Ovo in Indonesia, where, according to a Think With Google report, 66 per cent of the population is unbanked, enables passengers to use cash to top-up their e-wallet balance through drivers, while in transit.
How is Grab mitigating the risk inherent in financial products even as it helps a traditionally underserved demographic across the region?
Key to how we manage risk is our approach with MSMEs and underbanked individuals, who are often considered high risk groups. We have a unique advantage as our proprietary credit decision engine uses machine learning and AI based on both existing traditional data, like monthly income statements and alternative data from the Grab platform, like minute-by-minute earnings from GrabFood and GrabPay merchants, user satisfaction ratings as a driver and even driving behaviour, among other considerations.
It determines who we whitelist, and allows us to assess user creditworthiness. And so, we are able to provide financing solutions safely and minimise risk, even for partners who cannot typically obtain loans through conventional banking facilities.
How does this initiative tie into Grab’s overarching vision and ambition as a company?
I can only speak about GFG rather than Grab. One of our core goals is to increase financial inclusion in the region through our products and services. The gap is huge, with at least 198 million people in Southeast Asia who don’t have a bank account, and over 70 per cent of Southeast Asians underbanked (according to e-Conomy SEA 2019 report from Bain, Google and Temasek). Since 2012, we’ve helped an estimated 1.7 million micro-entrepreneurs open their first bank account.
We also give working capital loans to SMEs, and have expanded our SME lending to four countries (Singapore, Malaysia, Thailand, Philippines) to support our food and retail merchant partners. This removes a key barrier to SME growth and creates more access for people who have traditionally been left out of financing opportunities.
These examples point to our current top focus – to grow our twin ecosystems of consumers and merchants and outserve them in Southeast Asia. In doing so, we will capture the tremendous potential in financial services in the region – expected to have a full revenue potential of $60 billion by 2025 (according to the Bain, Google and Temasek report: The future of SEA’s digital financial services). We’re doing this by building on our merchant ecosystem with ‘Grow with Grab’, and our consumer ecosystem with ‘Thrive with Grab’. To that end, we continue to be hopeful with our application to obtain a digital full bank license in Singapore in partnership with Singtel.
Our long-term goal is to continue to transform fintech and become a platform for Southeast Asians to fulfil their financial needs, while also making our products and solutions more accessible, affordable and transparent.
This article was created in partnership with Grab. To know more about the Thrive With Grab initiative, please visit the Grab website