Grab Financial to launch Singapore-Philippines remittance corridor by year-end

Grab Financial head Reuben Lai.

Grab Financial, the financial arm of Southeast Asia’s most-valued ride-hailing startup, is looking to launch its first cross-border remittance corridor between Singapore and the Philippines in the fourth quarter of 2019, according to a top executive.

The move will allow users to remit money instantly and securely using their GrabPay wallets, Reuben Lai, senior managing director of Grab Financial Group told DealStreetAsia, adding that remittances play an important role in Southeast Asia’s economy.

According to World Bank data, remittances reached a record high in 2018 and the Philippines is the fourth-largest remittance market in the world, valued at $34 billion.

“This represents both a clear opportunity and an issue to resolve, as remittance is often a lengthy and laborious process from sender to agency to receiver. We are also looking to launch other remittance corridors in the near term,” he said.

The move to launch a cross-border remittance product came last November, shortly after it secured a $50-million funding from Thailand-based KASIKORNBANK, making its entry into the Thai payment space.

Grab president Ming Maa had hinted last September that the startup planned to add peer-to-peer (P2P) and remittance services as part of its grand plans to become the region’s super-app.

However, Grab is not the only player that is looking to tap the remittance opportunities in the region. The sector’s deregulation is paving way for several cross-border payment startups to enter Asia, including UK-based TransferWise and Revolut, according to a report by Nikkei Asian Review.

Strong growth expectations

For the first six months of 2019, Grab’s payments business has grown by 100 per cent, said Lai. He expects Grab to grow strongly in financial services over the next few years, with lending and insurance forming the bulk of Grab Financial Group’s business.

The ride-hailing unicorn is also considering to spin off its payments and financial services businesses and may raise capital for the two business units separately with a view to spinning off one or both of them at a later date, Grab’s co-founder and CEO Anthony Tan told the Financial Times in May.

We had earlier reported that Grab was in talks with Alibaba’s Ant Financial to raise funding for its financial services unit instead of the main holding company. In March, TechCrunch had reported that Grab was considering spinning off its financial services unit and was in talks with US online payments company Paypal, along with Ant Financial, for the same.

Lai maintained that the startup does not comment on market speculation and is focused on growing its payments and financial services business. According to him, GrabPay is leading by TPV (total payment volume) in Southeast Asia, while its Indonesian partner OVO is the leading payments provider in the largest market in the region.

“Grab’s total TPV has more than doubled in six months and total MAUs (monthly active users) are up more than 60 per cent and we are focused on growing this leadership in payments business across markets further. OVO’s TPV has tripled in the first six months of the year.”

US-based investment firm Invesco doubled down on Grab in June by pumping in an additional $300 million after an initial $403 million investment from OppenheimerFunds (which was acquired by Invesco this May) last July. In the announcement, Maa reiterated that Grab remains “laser focused” on expanding its financial services and mobility-enabled services business. A week after that, it bagged an undisclosed investment sum from UK-based consumer credit giant Experian.

More than just payments

Overall, Grab has come a long way from its ride-hailing roots, added Lai, who is tasked to lead the payment and financial services unit that was launched last year.

“Payments, along with food are now the core pillars of our business – complementing our leadership in transport. We are now the leading payments platform across the region by TPV, proving ourselves to be the most popular digital services platform in Southeast Asia.

“This leadership has been achieved on the back of high cross-vertical usage, lower acquisition and retention cost, higher customer stickiness and loyalty and rewards offerings,” he added.

Lai described GrabPay as the “unifier” of the ride-hailing startup’s ecosystem.

“It is payments that underpin all our services and allows for the rapid adoption of our new services such as parcel delivery, hotel bookings, movie ticketing, etc. GrabPay allows for the underbanked and unbanked users in Southeast Asia access cashless payments, giving them greater security, convenience and improving their quality of life,” he said.

Earlier this year, Grab Financial announced a suite of products across insurance and SME loans as it aims to become the region’s largest merchant network, insurtech policy provider and fintech lender, all on a single platform.

Lai declined to break down the number of merchants who use the Grab’s financial services but said he sees “significant interest in the product” since its launch, adding that users “definitely” view Grab more than a payments platfom.

“We offer our stakeholders across Southeast Asia a range of financial services such as SME lending, smartphone financing, home appliance loans, micro-insurance etc. We also have a Southeast Asia’s largest non-credit card rewards scheme with over 500 merchants participating.

“As Southeast Asia’s leading super-app, we have created an ecosystem that rewards users and encourages brand loyalty through our reward redemption scheme and subscriptions. We are proud to say that we have more than 40 percent of our active users, using multiple Grab services,” he said.

More partnerships to come?

Grab Financial has been making a slew of partnership announcements and looks like it will continue to do so in the coming months. Lai said through partnering with financial institutions, the startup will be able to grow the market together.

“We are not replacing them but we view the relationship with them as complementary. As a leading technology company, we will use data and data-driven insights to guide the development and curation of unique and innovative financial products and services that we can offer our users together with financial institutions.”

A report by Nikkei Asian Review said Grab is now weighing to apply for a banking license in Singapore, as the city-state said it planned to grant licenses for digital banks, giving a major shake-up for its financial sector.

When asked if Grab will look to acquisitions to boost its market share in Indonesia, a Grab spokesperson said the ride-hailing firm is a partnership-oriented company and “partnerships has been a big reason in Grab’s success across the region”.

“While there are situations we may choose to invest or build from scratch, we see great value in partnering with other companies so we can scale and offer new services efficiently and quickly.

“Whether we invest or acquire companies depend on many factors, including, but not limited to, the synergies a company has with Grab’s ecosystem, the growth potential of the company, and the valuation of the company.”

Grab Financial has yet to achieve profitability, as Lai said the unit is currently “investing for growth”. He drew a recent example where Grab pledged to invest $500 million in Vietnam in the next five years to grow its business and tap opportunities in fintech, new mobility solutions and logistics.

Well, Grab is not the only one that is doubling down on payments. Its biggest rival in the region, Indonesia-headquartered Gojek, has also been wooing investors from the financial services space boost its payments play, having secured strategic investments from the likes of Visa and Siam Commercial Bank.

Challenges and regulations

To date, Grab Financial offers its various services in six countries in Southeast Asia, the biggest among the region’s peers in terms of a number of countries. However, scaling a business across a highly-fragmented region comes with its own set of challenges.

The long-time Grab executive the challenges of growing the business lie in localising its financial products to fit the needs of users as there is no one-size-fits-all solution for the region.

“Based on data insights we are able to develop deeply tailored and localised financial services together with our financial partners, for our stakeholders across our different markets. Our reach across Southeast Asia and the fact we have access to six e-money licenses, gives us the opportunity to study the needs of each market and apply relevant solutions to those countries,” said Lai.

On the regulatory front, Grab Financial found regulations to be cognizant of the broader macro-opportunity fintech poses for Southeast Asia and its large, growing, mobile-first consumer base.

“We are constantly in talks with regulators and we believe our long-term goals of financial inclusion across the region, are aligned with the governments. Our goal of creating more income opportunities for the communities and improving economic livelihoods of millions is shared with the vision of the governments of the countries we operate in,” said Lai.