Grab Financial deals a blow to the banking industry

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The new platform will offer micro-financing products and services for Southeast Asia (SEA).  It will be a strong contender to become the top choice of underbanked consumers.

Editorial

On 13th March’s Money Asia 2020 event, Anthony Tan, CEO and co-founder Grab unveiled a new platform.  The fintech platform is called Grab Financial. It will offer financial services and agent services. It will group with payments services (GrabPay), rewards and loyalty services (Grab Rewards).

During the event, Grab also announced the launch of a consumer-lending venture. The company, Grab Financial Services Asia (GFSA), will provide loans and lending services. Consumers, micro-entrepreneurs and small businesses constitute the pool of unbanked people. The venture will support the takeoff of Grab Financial.

To grow Grab Financial further, Grab’s plans include insurance services. Grab partners Chubb, a global insurance company. Through the Grab mobile app, drivers can protect their car, livelihood and family. Grab is going all out to fulfil its promise to its 2.6million drivers.

Grab Financial will snatch away the bank’s future customers

Grab and Credit Saison Co. Ltd’s joint efforts will help GFSA flourish. Grab can contribute its massive database of customer data. On the other hand, Credit Saison can tap on its expertise in credit analysis and customer loans. Together, the data insight creates a sophisticated credit and risk assessment. This approach helps GFSA target the unbanked segments in SEA.

Banks follow a traditional methodology of granting credit. It considers information like bank account details, consumer spending patterns, income or debts. However, the majority of the SEA population do not have a bank account. Under the conventional rating scheme, banks may not lend consumers money now. As SEA’s economies grow, this group of people may open a bank account later. They are future cash cows or revenue for banks. But Grab Financial has beaten the banks to it. If Grab Financial is able to meet their financing needs, they will not need to rely on conventional banks.

Source: Grab

Competitors must not belittle Grab’s rise

Grab Financial appears to be targeting a segment outside of the usual scope of a bank. But, if Grab can educate and win the hearts of unbanked segments, how difficult will it be to charm the mass markets?

Grab is after all the region’s leading ride-hailing application. It has strong investor backing. It has moved from providing transportation to insurance partnerships to providing micro-financing offerings. Grab has the ability to vertically integrate the industry. One of its key weapons is data. Every year, Grab’s mobile application processes a billion transactions. Its strengths in data analytics will help overcome difficulties in entering new industries.

Grab’s leaders are resourceful. It capitalises on its own resources and maximises the strengths of its partners. Its food delivery business, GrabFood tapped on its pool of driver. It has numerous partnerships with largest market players. For example, Grab partners with Samsung Electronics, Singapore Airlines, and more.

If all goes well, Grab Financial will share the same success story as Kakao Corp. The South Korean internet company specialised in its messaging application KakaoTalk. It extended out of its dominant space and into the financial sector via its digital-only bank. Within five months of operations, KakaoBank has gained over five million customers. This would not be possible if it did not leverage on users’ trust and linkages with KakaoTalk.

Grab needs to take caution as it has too much on its plate

Grab is fighting battles on multiple fronts and in many nations. From an end-user perspective, Grab should be stabilising its core transportation offerings. There are competitors like Go-Jek, which it needs to outshine. It also has more new rollouts like GrabCycle and GrabBike.

In late March, Grab confirmed that it was acquiring all of Uber’s SEA operations. This includes food delivery service Uber Eats. The integration of Uber and Grab in all markets will take time. Grab needs to consolidate the database of drivers and systems. Additionally, it has anti-competition regulations to answer to.

With Grab Financial, there is more work for the Grab team to do. It opens itself up to competition in the cutthroat finance industry. The finance players may scramble to enhance its offerings and cut Grab out of the picture. It could be a waste of efforts if Grab is too slow to reap the benefits.

Sources: TodayOnline, Grab

Grab is here to stay

Day by day, Grab actualises its vision of improving the lives of people in Southeast Asia. It does not stop at job creation or collaboration with charity organisations. Instead, it has big aspirations. It has acquired smaller players to boost its capabilities. This year, it acquires its main competitor – Uber. Grab is growing big, and it is creeping into every bit of our lives.

The rollout of Grab Financial through its existing networks may guarantee success. But, Grab may be biting off more than what it can chew. It may be better off focusing on its launch to all SEA cities first.  This leap into the finance industry may be a little premature.