Ride-hailing app Grab Monday confirmed that it had reached a deal to acquire Indonesian payment startup Kudo, a step that is seen as being critical to augment its mobile payments platform, as it battles local competitor Go-Jek, in Southeast Asia’s largest economy.
Grab, the primary competitor to Uber in Southeast Asia, did not disclose the deal value, even as industry executives, as well as earlier media reports pegged it at $100 million, that includes a combination of cash and equity.
Big picture, this also marks the largest exit in Indonesia’s nascent startup ecosystem so far. It also provides an exit for Kudo’s investors, who include media conglomerate Emtek Group, as well as the likes of East Ventures, 500 Startups, Singapore Press Holdings, IMJ Investment Partners, and Skystar Capital.
In September 2016, Kudo raised an eight-digit funding in an investment round, following a series A round it had bagged the previous year.
The Singapore-headquarted ride hailing company, when announcing the Kudo deal, declined to provide any details, and only said that post the completion, the Kudo team and platform will be integrated with Grab’s mobile payments platform, GrabPay.
These developments come even as Grab is learnt to be in talks to raise an additional $1.5 billion in a new funding round backed by SoftBank Group Corp. In September last year, Grab had raised $750 million at a valuation of more than $3 billion, which so far has been the largest fund raising in this region.
To put today’s announcement in context, one will have to look at Grab’s recent commitment in capital towards Indonesia. When the ride-hailing app recently committed to investing $700 million in Indonesia, the capital was not aimed at escalating a price war with Go-Jek, or towards more incentives to its drivers, but largely towards enhancing and developing its payment platform.
Kudo’s model enables Indonesia’s unbanked consumers to shop online by connecting them with online merchants and service providers. The startup’s network houses more than 400,000 authorized agents in 500 towns and cities across the country.
“The Kudo team will join Grab and the Kudo platform will be integrated with Grab’s existing payments ecosystem. Grab will also support and accelerate the expansion of Kudo’s agent network across Indonesia, and leverage Kudo’s reach to bring more riders, and drivers and GrabPay users onto the Grab platform,” Grab said in a statement. Additionally, Grab and Kudo also plan to explore opportunities to grow Kudo’s financial services offering, including insurance and consumer loans, the company added.
“Combining Kudo’s innovative O2O e-commerce solution and extensive agent network with GrabPay and Grab’s massive and active customer base will advance our mission of providing millions of people across Indonesia with increased access to convenient cashless payments and new income opportunities, while also unlocking compelling new ways to boost online spending,” said Ming Maa, President of Grab.
“Kudo’s integration represents an important first step in our ‘Grab 4 Indonesia’ plan to provide all Indonesians an opportunity to move into the digital economy,” Maa added.
Grab 4 Indonesia is master plan Grab recently launched for Indonesia – one which entails a $700 million investment into the largest economy in Southeast Asia to battle its fiercest competitor, Go-Jek, and the first priority under this will be to build an R&D center with 150 engineers. With only about 36% of Indonesia’s population being bankable, and a majority of its citizens still using cash, the ride-hailing app, Grab has said that it will focus on developing financial technologies in that country, to enable a range of payments via smartphones.
Albert Lucius, CEO of Kudo, said that Grab’s shared vision of creating payment solutions that will in turn empower the unbanked will now be part of Kudo’s next stage of growth.
“Given that GrabPay is already one of the most widely-used payments platforms in Indonesia, this acquisition creates immediate synergies with our existing business. We are excited to work together to bring the ease and convenience of cashless payments to more Indonesians than ever before,” he said.
In November 2016, Grab announced the launch of GrabPay Credits in select markets across Southeast Asia to encourage a move towards a cashless society and improve safety by reducing dependence on physical cash. By partnering with banks across the region, GrabPay Credits enables consumers to book Grab rides through cashless transactions, even without a credit card, and use promo code discounts exclusive to GrabPay.
Grab first launched GrabPay Credits, a cashless stored value option for the Grab app in November 2016, followed by GrabRewards, which it claimed was Southeast Asia’s first regional loyalty programme for ride-hailing passengers in December 2016. In March 2017, Grab also announced that it would significantly expanding its global R&D capabilities, adding 800 R&D hires in the next two years, many of which will be focusing on developing payment solutions.
Kudo was established in July 2014 by Albert Lucius, a former analyst at Goldman Sachs and product engineer at Apple, and Agung Nugroho, a former consultant at Boston Consulting Group.
Jason Thompson appointed as new Head of GrabPay
Grab also announced the appointment of former Managing Director EMEA & Asia for Euronet, Jason Thompson, to lead GranPay.
Based in Singapore, Jason will oversee the development of new payments technologies that will deepen financial inclusion and increase access to mobile payments services across Southeast Asia, the company said.
“Not only does Jason bring deep expertise in the online and O2O payment space, he’s also a seasoned leader with experience in building teams of payment experts. We will need that expertise as we continue on our mission to change the way people travel and pay in Southeast Asia,” said Anthony Tan, Co-Founder and CEO of Grab.
Commenting on his new role, Thompson said: “I’m excited at the prospect of building our payments business from the ground up. A large portion of Southeast Asia’s 620 million people remain unbanked and continue to use cash – a costly and unsafe way to pay. With GrabPay, we have an incredible opportunity to provide a safe, affordable and convenient mobile payments solution for people across the region.”