Grab gets green light to be like Apple Card for Southeast Asia

Ride-sharing apps always seem to be racing to be something else — or at least something more — especially given the coronavirus pandemic's impact on travel. With a banking license in Singapore, Grab can add fuel to the strategy.

The Monetary Authority of Singapore recently issued a banking license to Singapore-based Grab, which was one of the four companies to get a license. Ant Group, a Greenland Financial-led investment consortium and Beijing Cooperative Equity Investment Fund management were the other three.

For Grab, it was good news in a year that posed no shortage of challenges, not just to Grab but to its clients as well.

"The pandemic has accelerated digital transformation in Southeast Asia, as it has in many parts of the world with lockdown and social distancing measures shifting many activities online — whether it’s working remotely, ordering food delivery, or doing more online banking," said Reuben Lai, senior managing director of Grab Financial Group. "We believe this change in behavior among individuals and small businesses is here to stay, even when the pandemic is over, and we believe that our digital bank will be well equipped to serve them."

Grab partnered with Singapore telco Singtel on its banking application. Grab has about 187 million users and Singtel has about 700 million; the two combine to form a large base of pre-enrolled consumers and businesses that use each provider to perform mundane tasks several times a day. The banking license will make it easier to embed digital banking into other services, linking mass digital enrollment, account opening, fast virtual card issuance and banking. That gives Grab the ability to push a model similar to Apple Card and Google's new account services via Stanford Federal Credit Union and Citigroup.

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"For digital financial services to succeed, our view is that it needs to take away the chore of managing one’s money but embedding it into the daily life of a customer," Lai said. "This also gives us tremendous insights to build personalised products that are loved by customers and priced to maximise accessibility."

About two dozen firms tried to receive a license, which Singapore floated as a way to boost financial inclusion in Southeast Asia through digital apps and branchless financial institutions. The license allows Grab to add credit cards and other lending products, as well as offerings that can generate interest income.

Grab's banking service will not launch until 2022, but like Square — which earlier in 2020 received an industrial banking license in the U.S — Grab can service its core markets with a bundle of banking, payments and financial management without relying on an underlying bank.

The pandemic hit Grab and other ride-sharing companies hard. Grab reported double-digit declines in ridership revenue, and adjustments such as executive pay cuts and introduced an option for drivers to deliver packages as well as riders. Grab wasn't the only ride-sharing company impacted, as Uber also suffered in 2020, reporting a 50% year-over-year decline in ridership in the third quarter. Grab's overall revenue has reached pre-pandemic levels, and and transport volume in cities where the lockdown has lifted have recovered. Uber, Grab and similar companies such as Lyft have all partially offset the declines through delivery as mobile ordering took off.

Uber and Grab used the pandemic to accelerate strategies to build financial services on top of their core apps. For example, Uber recently partnered with Marqeta to support transaction processing and card issuing for Uber services such as Uber Eats.

These companies will now be challenged to reinvigorate ride sharing as travel recovers, and embed rides with the other functions Grab and other firms like GoJek have been building. Grab has added and shed products in an attempt to find the right mix, dumping movie tickets while expanding into merchant acquiring through an e-wallet and mobile payment app.

Over the past two years, Grab has also launched, scaled and developed Grab Financial Group’s financial services offerings, such as e-money and lending into Southeast Asian markets. Also, Grab in August added more consumer financial services, including its first micro-investment solution (AutoInvest in Singapore), expanded its "‘buy-now-pay-later" offerings and launched more micro-insurance policies for ridehail users.

"Not only are these solutions helping to develop the rapidly emerging middle class, but they also democratize access to financial services and solve very real economic challenges such as access to the digital economy, especially in a COVID world where going online is not an option, but a necessity," Lai said.

Grab did not discuss geographic expansion for banking outside Southeast Asia, where it would need additional bank licensing. Its target markets for the digital bank are consumers, small businesses, young professionals, gig workers and micro merchants.

"Our mission has always been to solve the everyday challenges and unlock the economic potential of Southeast Asia," Lai said. "The license takes us even further, allowing us to leverage our cloud technology and data platforms that have already proven successful for other use cases, and enables us to offer personalized, accessible and trusted financial products."