Grab has recently launched its master plan 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, Ridzki Kramadibrata, the ride-hailing app’s managing director in Indonesia, said in an interaction. With only about 36% of Indonesia’s population being bankable, and a majority of its citizens still using cash, the ride-hailing app, will focus on developing financial technologies in that country, to enable a range of payments via smartphones, he explained, even as he added that the company was open to partnering with both fintech startps as well as banks. He however declined to comment on the market buzz that Grab had reached a deal to acquire Indonesian fintech startup Kudo, that targets consumers with no bank accounts in small towns and cities, helping them to make purchases online through its agents. According to industry executives, the Kudo deal is valued at over $100 million. Edited Excerpts.
Let me first ask about the rumor that Grab will acquire Indonesian O2O platform Kudo for $100 million. Is this rumor true?
I can not say anything about these rumors. I know everyone has many questions, but for now, I can not say anything about it.
Tell us more about the program Grab4Indonesia that was launched recently?
When we launched our master plan, Grab4Indonesia, we demonstrated a commitment to the market through a series of programs within the next four years. The first priority is to build R&D center in Indonesia, which is the fourth R&D that we have in the world. Grab already owns centers in Singapore, Beijing, and Washington. R&D will be a major investment, considering we are a technology company. It shows our commitment not only to cultivate the potential of this market but also our commitment to understand the market better.
How much is is being set aside for R&D?
There are no exact figures, but we are targeting at least in the next two years the R & D has to be built, and that we will have 150 engineers. This is different from other technology companies – even the homegrown ones – which tend to invest R & D abroad. At Grab, we believe that it’s time for us to invest in Indonesia for several reasons. Number one is because we would like to understand the Indonesian market better in order to connect our technology to local needs. Number two, our engineering organizations are already matured now. We’ve got a lot of top engineers that we recruit from many global organizations such as Google, Microsoft, and Amazon. We also provide an opportunity for local engineers to connect with our global ones so that they can learn to work within the international standards.
What are the differences between Indonesia and Singapore as markets?
The market in Indonesia is very unique. The population is huge, with 250 million people, almost half than the total of Southeast Asia’s population. Indonesia is a challenge but at the same time is a pothole of opportunities. The problem in Indonesia is that major cities in the country do not have adequate public transportation. Much of the cities transportation are still dependent on conventional systems like taxis, buses; and a lot of people are still relying on private vehicles. This creates massive traffic jams. The lev- el of income is still varied, though paralleled with decent economic growth and middle class population.
In other words, our true opportunity in Indonesia lies in the scale in which our products can cater to most people’s needs. It has the potential to be a mass solution, which we can already see right now. We offer solutions of effective public transportation that can help reduce inefficiencies caused by traffic jams, and, in the future, we would also like to play our role in providing alternative incomes for the masses through the significant number of our drivers.
What will be the focus of the strategy Grab Indonesia under Grab4Indonesia program?
In terms of solutions, we will focus on tech solution for transportation. It is very important to highlight here that the vision of our master plan is to invest in things related to mobile technology and financial solutions. These two aspects will be our focus.
In Indonesia, the percentage of the population that is bankable is only 36%, still very low compared to other Asian countries. Currently, the majority still use cash, and so access to financial tech and financial payment method becomes very important. Mobile tech becomes the second major thing that we are going to pursue. Even though smartphones have become the main device in metropolitan cities like Jakarta, other areas such as Sumatra, Kalimantan, and Sulawesi still do not enjoy the same status as smartphone penetration is still low in these regions.
In short, we will try to find ways to help people access our solutions through their existing gadgets, and/or develop a financial solution in which people can buy smart- phones.
Schemes being considered for the financial solution?
For drivers, we have been very active to provide help, especially whenever we want to enter a new market. Right now we work closely with financial institutions to provide financial solution for smartphones. We work with some phone providers as well. These things we are already doing. In the future, we will develop further micro-financing pro- grams for both vehicles and the device.
Does this mean that Grab will cooperate with the bank and also fintech companies to develop the financial programs?
We do not rule out the possibility to cooperate with fintech companies because the key here is building a solution.
Have there been discussions with fintech startups about this?
Of course, we have spoken to several fintech startups. This is to support the Grab4Indonesia masterplan. We have also begun talks with the authorities to support our plan. In fact, we can say that we have been endorsed by the government, by having two ministers (minister of communication and head of BKPM) present during the Grab4Indonesia launch. Both are very committed to support our program. They have promised to connect us with other relevant ministries and institutions such as the central bank and finance ministry. We will also work together with the ministry of trans- portation, the ministry of labor, and even with the ministry of tourism.
Why tourism ministry? Do you see an opportunity in the tourism industry?
Yes, we see that we can play a role to help the Indonesian tourism. There is always a huge flow of travellers coming to Indonesia – either for leisure or business. And the number one headache when traveling is always transportation. Often, we have troubles communicating with drivers. A language barrier, broken taxi meters and so on. With Grab, we will address these concerns through seamless technology, fixed price, and guaranteed security. We find this tremendously helpful for tourists. In Indonesia we have been operating in three major tourism cities – the island of Bali, Jogjakarta, and Bandung – and are planning to launch in more cities this year.
What is your current market share?
There is no particular study for ride-hailing market share right now but I’m sure there will be soon, given the importance of this business. But for transportation, we are already the market leader both for Indonesia and SEA. We have a presence in six coun- tries and 35 cities in the region. In Indonesia, we are present in eight. No other ride- hailing apps has this kind of domination.
Your biggest competitor, Go-Jek, is more than just a ride-sharing platform. It is now has evolved into an integrated platform that does not cater to transportation only, but almost every aspect of consumer business. Would you try to position yourself the same way in order to compete, and if yes, does this mean we will see more of food and grocery delivery services?
We believe transportation is one of the few areas to be beneficial for society while at the same time has a high level of usage. Transportation is essential. We believe that focusing on transportation and making the experience seamless and dependable is the key to win the customers’ hearts. Right now, we are the only one in Indonesia that has such complete service today: we have Grab Taxi, Grab Car, Grab Hitch. So a complete series of services for different preferences and needs at a given time. This is actually one of our core strengths that significantly contributes to our user retention. Ac- cording to our internal study, at the beginning of last year the ratio of users that use this multi-model was 1 of 4. That ratio increased to 1 of 3 by the end of the year. So that confirms that users see a variety in transportation services in one app as a plus point.
Moreover, we believe that our tech is the most dependable in terms of service reliability. What makes it reliable is also because we use hyperlocal strategy, meaning that our system understands local needs. For example, in Jakarta there is an odd-even plate number policy. (Under the policy, during odd dates, only cars with odd license plate numbers are allowed to use the thoroughfares and during even dates, only cars with even plate numbers are allowed to pass. The policy is enforced from 7 a.m. to 10 a.m. and 5 p.m. to 8 p.m.). Now, with Grab technology, orders from and to restricted places will be allocated only to cars with matching plate numbers.
Our transportation business will also be supported by our commitment to devel- op payment platform. In Indonesia recently we launched Grab Pay. We have worked closely with prominent financial institutions such as Mandiri, and will continue to do so.
Does this mean that you will not pursue consumer business services like Go-Jek has done?
We see the consumer business as an ecosystem. In the end, anything that relates to consumer business will need transportation. For example, there is a need for people to go to the mall, and therefore will use some kind of transportation. We see an opportunity where we can partner with these malls to provide transportation, to ease pick ups, drop offs, and so on. But we will definitely focus on transportation, and any- thing beyond that we will do through partnerships.
Could you clarify to us about what happened with Badrodin Haiti?
Yes, so here’s the story. We actually came to an agreement with Mr. Haiti that he would become our president commissioner in November 2016, where the decision had been ratified by shareholders in the annual general meeting in the same month. But we learned right after – a week after – that Haiti had already accepted the same position for Waskita Karya. We were then being advised that under a new rule launched in that year, a member of state-owned boards and/or executives can not hold double posts. A discussion was conducted later with Haiti, where we conveyed that as an organization we want to obey the rules. So we came to an agreement with Haiti that he would be our senior adviser instead.