It’s said that the journey of 1,000 miles begins with a single step. The journey to build a digital ecosystem from the ground up starts with a single step, too: getting a critical mass of stakeholders on a vital side of that platform on board.
It’s a first step that looks easy in retrospect, and only after a platform has gotten off the ground. The thousand-mile journey that follows involves a series of calculated decisions about how to enrich the value exchange between those stakeholders to help the platform scale.
For Grab, the Singapore-based ride-hailing app sensation turned financial services ecosystem for the 650 million people living in Southeast Asia, that first step was getting taxi drivers on board the Grab platform. Grab Founder Anthony Tan observed the frictions associated with getting a taxi in his home country of Malaysia, and set out to change the dynamics of that business. He did that, among other things, by offering mobile phones to taxi drivers, and a better business model that put more money into their pockets.
The Grab ecosystem was born.
Those more mobile, tech-enabled drivers were able to grab more fares, and more fares helped them move up the economic ladder. More importantly, those digitally enabled drivers created a digital payment acceptance ecosystem that gave consumers and drivers more of an incentive to use the Grab Wallet to pay for rides. With more people using the Grab Wallet, it became easier to attract other stakeholders who saw the Grab platform as a way to create and ignite new digital payment use cases.
Today, now seven years and some $6 billion in venture investments later (including $4.5 billion in a recent funding round led by SoftBank’s Vision Fund), comes an expanded focus on payments and financial services, which also serve to keep consumers and drivers well within the growing Grab ecosystem. Grab has moved, or plans to move, into such areas as food delivery, insurance, lending and digital payments via GrabPay and Grab Wallets — an effort similar to Uber Cash, part of Uber’s own payments and commerce ecosystem.
The story of Grab, its recent growth and its plans for more are also a story about changes in a part of the world where cash still dominates, but where hundreds of millions of consumers are adopting eCommerce and the digital payments that come with it. In a new PYMNTS podcast, Karen Webster spoke with Reuben Lai, senior managing director of Grab Financial, about the development of that ecosystem, and the consumer experiences that Grab is trying to capture and manage, including the launch of a global remittance service. That service was inspired by how much Lai’s housekeeper had to pay to send money back home — a fee that approached 10 percent of what she was sending, he said.
From Grab To Growth
During the podcast, Lai told a story that illustrated the ideals of the Grab ecosystem and part of its user population — a brief, rags-to-riches tale about an Indonesian construction worker who once earned little and kept the cash hidden under his mattress. After driving for Grab, his wages increased tenfold, and he was able to open a bank account and secure a loan that he used to buy a motorcycle, which he then rented to other drivers.
“He earned more income and was able to buy a house,” Lai said. “Right now, he’s saving up to buy a chicken farm.”
During the conversation with Webster, Lai added that such an example represented the experiences of “many people on our platform.”
Part of the reality in which Grab operates — a 10-country region that will stand as the world’s fourth-largest economy by 2030, Lai told Webster — is that cash still dominates as a payment method. That’s despite projections that eCommerce will reach $240 billion within the next few years, up from about $70 billion today. Seventy percent of consumers, Lai explained, are also under- or unbanked, and lack access to credit.
Those facts have informed how Grab is building its mobile, digital ecosystem. The vast majority of its drivers lacked bank accounts and ready-access to loans. As part of its platform, those drivers can become banked and, with the app, can see their cash flow minute by minute, Lai noted. Grab can also use that real-time visibility into revenues to help those drivers access the capital needed to grow their businesses.
“There is a tremendous opportunity to bring the emerging middle class online,” Lai said, which includes giving all consumers access to bank accounts, insurance and financial services, as well as loans to help educate their children — a use case for Grab credit about which Lai feels a personal passion.
Scaling The Platform
Lai told Webster that the company’s expanding reach also gives it a wider, deeper look into the behavior of those who are part of its ecosystem, and the insights that can guide business decisions to help the ecosystem scale.
One way of doing so is via partnerships, Lai said — specifically, with “large mall operators in every country we serve.” Why do that? One reason is climate — much of Southeast Asia is incredibly hot, and malls offer air conditioning, as well as meeting places and hangouts for families and friends.
Where there is a critical mass of consumers and merchants, there is an opportunity to reinvent how they interact and transact. For example, a recent partnership with Mastercard, he noted, makes it possible for Grab customers to use their Grab Wallets at any store that accepts Mastercard — in those malls and other places in the countries Grab serves. Giving those merchants access to consumers with digital wallets and new ways to pay, he said, opens new opportunities to grow their sales, and for Grab to expand its footprint of merchants that accept Grab Wallet.
During the podcast, Webster asked Lai about the challenges associated with creating and scaling a platform across 10 countries that are different from each other not only in terms of language and history, but in states of economic development, as well as speed of economic and eCommerce growth. This complexity is top of mind for Lai and the Grab team. He explained that the situation for Grab in Southeast Asia differs from those who concentrate on just one country, even if that country has a massive population base, such as China.
“We are dealing with 10 different countries, 10 different regulators, 10 different customer bases.” he said.
The challenges of dealing with those many different regulators alone are things that any player wanting to plant its flag in that region can easily underestimate, he added. Then, there’s the challenge of adapting a mobile, digital payments offering across countries that are varied in terms of financial literacy and economic prosperity.
For instance, Singapore, home to Grab, is a highly developed and wealthy digital economy. The country is vital to world trade, banking and finance, providing homes and careers to large numbers of well-educated people (including foreigners and expats), and has a stable government that tightly controls many aspects of life.
It could hardly be more different from Cambodia — a highly rural country that is still moving past the shadow of decades of war and violent political repression in the 20th century, where cash dominates and the middle class is relatively tiny. Vietnam continues to open up to Western-style economic practices and trade, while the Philippines is enjoying explosive growth in eCommerce, along with stifling the poverty across many of its islands.
As diverse as those regions are, they share a common friction: easy access to reliable transportation. The Grab platform, with the Grab Wallet, solves for that by first making it easier for those who need a ride to get one and pay for it by using their mobile phones. Eliminating that friction creates a formidable beachhead from which a mobile financial services ecosystem of value-added services can emerge, as the country’s digital evolution and the needs of its citizens evolve.
Lai explained to Webster that the many stories he and his team hear about the differences Grab has made in people’s lives inspire them to expand the ecosystem across the region even faster. In some ways, he said, creating new partnerships, working with regulators and creating the services that can improve the lives of the 650 million people living in Southeast Asia is the “easy part.”
What’s challenging, he admitted, is acquiring the talent required to accelerate its plans for growth. Finding talent is one thing, but persuading those potential employees to move to an often-distant part of the world — especially for a “young industry” — is quite another. Indeed, hiring stands as one area that will benefit from some of Grab’s new funding, particularly as it turns its attention to expansion in financial services and other areas.
“We want to increase our skills in lending and insurance,” Lai said.
As payment and commerce ecosystems operate in other parts of the world, especially China, the ongoing and looming growth in Southeast Asia could bring more. However, building a successful ecosystem is about much more than having the right technology. It’s about reducing friction in such a way where stories can emerge like Lai’s tale of the Indonesian construction worker who worked his way into a better income and life.
That’s not only how great platforms get their start and how they scale, but how they ignite economic prosperity for the people they touch and the countries in which they operate.