Grab could disrupt multiple businesses in ASEAN region

Founded in 2012, Grab has made numerous headlines in recent years as it expanded throughout Asia. Grab could be the biggest disruptor of businesses in ASEAN region in the next 5 years.


Grab could operate Singapore third largest taxi business

In April 2017, SMRT was rumoured to have started talks to sell its taxi business to private-hire operator GrabTaxi Holdings Pte Ltd. SMRT’s taxi business is the third largest in Singapore. After 27 years in the market, SMRT could be exiting this suboptimal business segment to focus on other land transport segments. This is part of SMRT’s review of its businesses since last November 2016 while it was delisted.

One reason explaining the potential exit is the need to focus on ensuring quality rail services in Singapore. SMRT’s bus businesses could also be on the way out as Singapore attempts to fix their recent problems with rail delays and stoppages.

In the same month, Grab also agreed to acquire KuDo Technology Indonesia, LLC, a payments technology firm. Grab is likely to move into e-commerce and payments space in emerging markets in ASEAN. After all, why operate a wallet just to service payments for rides?

Imagining the future for Grab

The cash burn rate to complete for mobility market share is high. Grab is effectively competing with the world’s best funded firm, Uber, for market share in Southeast Asia. In Indonesia, Grab has to compete with Go-Jek. Competition is stiff as customers seek lower fares and drivers seek fair pay. The two forces will never reconcile.

The sweet spot for Grab lies not only in fees for rides, but in the age old business of payments. Taxi rides, private-car hires should only be step one of Grab’s quest for success in Asia. With rapid acquisition of customers and merchants (all Grab registered taxis and cars), customers now have no qualms leaving a few prepaid dollars in Grab’s wallet. What if Grab decides to acquire e-services, physical products and services? Imagine the future where you could use your Grab application to pay for food and groceries through ASEAN.

The opportunities for growth are tremendous. The primary revenue source could comprise of;

  1. Taxi and private car hire fees
  2. Payment related fees
  3. Interest on float of deposits on Grab’s wallets
  4. Cross border payments fees and Forex spreads
  5. Remittances and transfers

Grab is seemingly only focusing on item one – fees related to mobility. But as their appetite grows, shadow banks and banks should be mindful of their potential.

Disruption across various sectors

Disruption is healthy for consumers. Today, consumers pay lesser fares and get to avoid long queues for taxis. For taxi drivers in ASEAN region, they will complain as Grab and Uber collectively introduce more competition. But transport companies will not be the last to experience discomfort.

Today, Uber has expanded to delivery of food. will have to fend off attacks from Deliveroo and the very well-funded Uber. Grab’s expansion into commerce through KuDo sends a stern warning to physical retailers who still prefer cash. Payment intermediaries should also ready for aggressive competition in the near future.

However, the customers will emerge as the sure winners of these competitions.