Grab announced today that its financial unit, which previously focused mainly on services for entrepreneurs and small businesses, is launching a slew of consumer products, including micro-investments, loans, health insurance and a pay-later program.
Based in Singapore, Grab began in 2012 as a ride-hailing company before expanding into on-demand deliveries and other services. In January 2019, it formed a joint venture with ZhongAn Insurance to build a digital insurance marketplace. Since then, its financial services portfolio has grown through a series of partnerships and the acquisition of Bento, which allowed it to offer investment and wealth management services as well.
In February, Grab announced that it had raised up to $856 million to speed up development of its payments and financial services.
Yesterday, Bloomberg reported that Grab raised $200 million from South Korean private equity firm Stic, bringing its total funding so far to more than $10 billion at a valuation of about $14.3 billion. A Grab spokesperson declined TechCrunch’s request for comment on that raise.
Tapping into a growing market
During a call with reporters today, when asked if Grab has a timeline for reaching profitability, Reuben Lai, senior managing director at Grab Financial Group, said there isn’t one yet, but "research has shown that there is a real demand for the products we are launching today. What we really want to do is focus on consumers and make sure we deliver products they use. We think profitability and sustainability will follow."
Grab Financial Group's new products include AutoInvest, a platform that allows consumers to invest small sums of money through Grab’s app; consumer loans; a buy now, pay later program; and expanded insurance offerings, including hospital insurance that will first launch in Indonesia.
While Grab's new consumer products were in the works before the COVID-19 pandemic, Lai said the crisis has accelerated demand for services like online shopping, digital payments and insurance.
Grab’s consumer products will compete with services like StashAway, an online investment platform based in Singapore, but Lai said Grab Financial Group’s competitive edge is that there are already millions of Grab users in Southeast Asia. This gives it a built-in consumer base and also data to continually refresh the scoring models it uses to determine creditworthiness.
According to a 2019 report by e-Conomy Asia, a research program run by Google and Temasek, about 70% of people in Southeast Asia are "underbanked," meaning that they lack access to credit cards or long-term savings products. Even in Singapore, one of Asia’s financial centers, about 40% of consumers qualify as underbanked. Bain and e-Conomy estimate that the digital financial services in Southeast Asia can generate $60 billion in revenue by 2025, making it a lucrative market for Grab.
Micro-investing and insurance
Most of the unit’s insurance was previously focused on Grab’s ecosystem, including drivers and merchants on its platform. But new products, like hospital coverage that will launch in Indonesia first to supplement the country’s national healthcare system, are targeted at consumers.
Chandrima Das, who founded Bento in 2016 and is now head of GrabInvest, said Grab’s new micro-investment solution will be accessible through Grab’s digital wallet. It allows users to invest as little as SGD $1 at a time into liquid fixed-income funds managed by Fullerton Fund Management and UOB Asset Management, with the potential to earn returns of about 1.8%. It will launch first in Singapore at the beginning of September.
While Grab Financial Group already offers working capital loans to drivers and financing for merchants on its platform, its new consumer credit products include PayLater, which allows users to pay for Grab services at the end of each month, and will first be available in Singapore and Malaysia.
The company is also offering consumer loans from third-party licensed banks and financial institutions with an application process that Ankur Mehrotra, Grab Financial Group’s head of lending, says is so simple "you can do it while sitting on your couch watching Netflix."
Mehrotra said benefits of the program for merchants include increased gross merchandise value, larger basket sizes and lower cart abandonment rates.