How a college project took on Uber — then set its sights on payments

By Michael Moeser

Too big to succeed?

In today’s high-tech world, where mobile apps and the internet reign supreme, it’s difficult for entrepreneurs to create a sweeping new platform when there is always a specialist somewhere who can deliver niche products faster, better and cheaper than the generalist. 

That’s what makes Southeast Asia’s Grab so unique. It was not only able to grow by offering a number of services that stem from its original taxi coordination platform, but to thrive in the face of competition by bolting on services which, in some cases, appear to be completely unrelated — such as gold savings, movie tickets and medical insurance. 

In many of the markets where Grab operates, cash is heavily favored. While this is certainly a challenge for a digital company, it also means that Grab can be the first financial relationship for many of its drivers and passengers. This has given it a foundation upon which to offer a broad range of financial services.

By understanding local culture and the needs of its constituents — consumers, small merchants, contractors and partners — Grab is able to string together a collection of basic services that that allow it to be, in Grab's words, an “Everyday-Everything App.”

Critics would argue that Grab is swimming upstream. Other companies tried to go global too quickly without adapting to local needs and understanding the importance of cultural differences. Often this occurs when a Western company takes its U.S.-centric business model and attempts to deploy it in a region that has significant cultural differences.

In the case of Uber, it took only a few years and some heavy financial losses to realize its model doesn’t work everywhere. Uber sold its Chinese operations in 2016 to rival Didi Chuxing for an 18.8% minority stake in Didi Chuxing. In 2017, Uber sold its Russian operations to Yandex for a 36.6% stake in the firm. 

And in 2018, Uber sold its Southeast Asian operation to Grab in return for a 27.5% stake in the company. In 2020, Uber sold its Uber Eats India subsidiary to a local rival, Zomato, for a 9.9% stake.

Uber's decision to concede territory to Grab wasn't just about ride-sharing. It is also important to understand how this plays out in financial services, since Grab is aggressively making inroads into this market — and even building a new, digitally savvy market from scratch. Grab has reported that it plans to partner with telecommunications giant Singtel to apply for a digital banking license in Singapore to target small and medium sized businesses that struggle to gain access to credit. 

According to the World Bank, 71% of consumers in Grab's region are paid for their employment in cash. Banking in Southeast Asia is dominated by large money center banks such as Citigroup, HSBC and Standard Chartered.

These banks tout one-stop offerings to their customers with financial services that are beyond the reach of many Grab passengers and drivers. Another important distinction for Grab is that these large banks focus on consumers that have steady jobs, are paid by bank transfer from their employers, and are not reliant on the cash economy.

In 2016, Grab launched GrabPay, a mobile wallet that allows for in-store shopping, buying rides and gifts as well as sending person-to-person transfers. It's somewhat similar to Alipay in China and Paytm in India. The Grab wallet is an important entry point into the Grab ecosystem, particularly for the non-banked population.

Additionally, Grab offers financial services such as business capital loans and insurance products to its drivers, merchants and enterprises. 


Grab’s unique mission

To better understand Grab, one must get down to the fundamentals of its strategy. 

Grab’s founders and backers include Toyota, Hyundai, Softbank, Experian, Uber and other firms that expect Grab to make money and pay healthy financial returns on their investments.

“Our mission is simple, it guides everything that we do and it’s why people want to work with or for us. It’s on our website, in our marketing materials and in everything that we do. ‘We drive Southeast Asia forward, by elevating the quality of life for everyone’," said Ankur Mehrotra, managing director and head of financial services at Grab.

Mehrotra joined Grab over four years ago after being an entrepreneur of a Singapore startup that specialized in online restaurant reservations. Prior to that, Mehrotra spent six years at the International Monetary Fund in Washington, D.C., managing the Poverty Reduction and Growth Trust fund; and four years at Standard Chartered Bank in structured trade finance for Southeast Asia.

Mehrotra's decision to move to Grab came down to the company culture and the mission Grab is on to change consumers’ lives in Southeast Asia.

“What really sold me on Grab was that at the core of their operations, their mission, is that every prospective employee has to demonstrate the four “H’s” which stands for heart, humility, honor and hunger," Mehrotra said. "If these stand out in the interview, then not only do we have a cultural match, we also have someone who is empowered to succeed. In every interview we test a recruiting candidate as to how they will make a difference, not just for the company or their career, but how they will make a difference in the lives of our customers, merchants and drivers. You need to show that you have a heart and are hungry enough to have an impact on the societies that we serve in Southeast Asia.”

Not everyone believes Grab is a force for good. Like its rival Uber, Grab has been the target of protests from local drivers who see it as a threat to their livelihood.

In Jakarta, a 2018 protest in support of motorcycle taxi drivers turned violent, with protesters smashing a window at Grab's office, according to local reports.

A taxi driver stands next to a cab displaying a banner during a protest in Jakarta, Indonesia, on Tuesday, March 22, 2016.

A taxi driver stands next to a cab displaying a banner during a protest in Jakarta, Indonesia, on Tuesday, March 22, 2016.

Indonesia's regulators introduced regulations last year that would place minimum and maximum fare rates for services such as Grab. As of January 2020, Indonesia considered raising those rates to reflect rising health-care costs.

For its part, Grab has invested in deploying new technologies such as an electric taxi service. Grab has also reportedly discussed the development of smart cities and green initiatives with Indonesia's government.

Grab argues that it is having a positive impact on Southeast Asia, as outlined in its 2018-2019 social impact report called “Grab For Good.” 

“For 21% of our driver partners, this is their first steady paycheck," Mehrotra said. "Prior to Grab they had no steady income or work. When it comes to financial inclusion, since our founding in 2012, we’ve helped over 1.7 micro-entrepreneurs open their first bank account.”

In the Grab For Good report, the company highlights other effects it has had in the Southeast Asian region: Grab has contributed $5.8 billion to the Southeast Asia economy over a 12 month period of April 1, 2018 through March 31, 2019. Over 9 million micro-entrepreneurs, or about 1 in 70 people in Southeast Asia, have earned income using the Grab platform. Cashless payments are up to nine times higher on Grab compared to overall country cash usage.

“Our impact is the reason why one in three smartphones in Southeast Asia have downloaded our app,” said Mehrotra.

Grab defines its principal Southeast Asian markets as Singapore, Malaysia, Indonesia, Thailand, Myanmar, Cambodia, Vietnam and the Philippines. 

The growth of Grab

Grab began as a way to improve taxi services in Malaysia, creating a mobile app that could connect prospective riders with drivers.

Anthony Tan, co-founder and CEO of Grab, pitched the idea with co-founder and fellow student Hooi Ling Tan (no relation) and with another student, Adeline Chan, while attending Harvard Business School in 2011. The trio entered the idea in Harvard’s New Venture Competition and won a runner-up spot. Anthony Tan took the $25,000 in prize money, along with his own personal funds, and launched the app in Malaysia under the name MyTeksi with co-founder Hooi Ling Tan. 

The company soon changed its name to GrabTaxi, and is now known as Grab.

Anthony Tan, co-founder and group chief executive of Grab, left, sits with Hooi Ling Tan, co-founder and chief operating officer.

Anthony Tan, co-founder and group chief executive of Grab, left, sits with Hooi Ling Tan, co-founder and chief operating officer.

Grab provided participating taxi drivers with smartphones so that they could communicate directly with riders. The smartphones also allowed Grab to solicit feedback on taxi rides, so it could weed out any problematic drivers. 

By having both drivers and riders using its mobile app, Grab could bring those audiences into its ecosystem of rides, insurance and payments while improving overall safety and quality of services delivered.

Grab's ride share service helps to solve traffic congestion

The cumulative average number of days commuters spend stuck in traffic

Bangkok, Thailand
Jakarta, Indonesia
Manila, Philippines
Source: Grab

“Grab’s intent is to bring you into their ecosystem via the mobile app and … make you never want to leave," said Richard Crone, principal of Crone Consulting. "For many consumers in Southeast Asia, it’s the first time they have access to digital payments ... For others, it’s a way to get a steady paying job by delivering packages. Yet in most cases, the Grab app is the bridge that allows consumers, especially the financially underserved, to move from the offline world to the online one.”

When Grab launched in 2012, it faced a nascent regional competitor in Gojek, which has now become a multi-billion business. In the near future it would also face Uber, which launched in 2013. 

Gojek was founded in 2010 in Indonesia and has since expanded into Malaysia, Singapore, Thailand, Vietnam, and the Philippines, plus other countries such as India. The word Gojek is a portmanteau of the words “Go” and “Ojek,” the latter of which is a Bahasa Indonesian word for taxi bike or taxi motorbike.

Gojek's early strategy strongly resembled that of Grab's. Gojek recruited existing taxi services, albeit with a focus on motorbike taxis, which are very common in Indonesia. However, in other Southeast Asian countries motorbikes are not as prevalent.

Gojek has since expanded into car ride-hailing with Go-Car and other partnerships, and is a major rival to Grab, albeit with a greater focus on ride share and food delivery.

The main difference between Grab and Uber was that Uber competed directly with taxi services by recruiting only individual car owners. Since car ownership is much lower in Southeast Asia, this limited Uber’s ability to recruit drivers. 

The other key factor that benefited Grab over Uber was credit card ownership among riders. In markets where credit card ownership is very low, Grab accepted cash, while it took time for Uber to adjust its model and accept cash.

“Credit penetration in Southeast Asia is about 17%, so you need to figure out how to get cash into the app or ecosystem or simply accept cash at point of service," Mehrotra said. "Otherwise it limits your ability to serve customers.”


A digital company in a cash economy

Companies like Grab, Uber and Lyft want to remake their customers' financial lives, starting with the concept of a seamless payment experience. 

While Grab may have a clear understanding of its audience in a cash economy, Uber is at its most innovative in regions where people are accustomed to digital payments and are looking for something even simpler.

The launch of Uber Wallet exemplifies this. Debuting in October 2019, the Uber Wallet account addresses both consumers' need for a simplified experience and drivers' need for faster payouts. 

Drivers with an Uber debit card can get their earnings in real time, based on Uber's existing relationship with Green Dot, which dates back to 2016.

Lyft has a similar focus on faster payments, recognizing drivers' need to receive their funds to refill their gas tanks and address other expenses on the road.

Grab's financial services offerings go a step further by providing insurance and financing to consumers and small businesses under the Grab Financial brand, which launched in 2018.

Grab Financial stemmed from a partnership with Credit Saison, a Japanese consumer financing company, and Chubb, a property and casualty insurance company.

Grab has partnered with other companies to extend digital payments in Southeast Asia for both its merchants and customers as well as for foreign companies who want to sell to members of the Grab ecosystem.

It works with PPRO, a global payments firm that works with card networks and local payment methods. PPRO signed a collaboration agreement in October 2019 to support GrabPay  in Singapore, and in a later phase PPRO will add GrabPay’s tokenized payments.

“Local payment methods like GrabPay are essential for merchants to convert as many customers as possible in different global regions," said Kelvin Phua, head of global payment networks at PPRO, who is based in Singapore. "In cash-heavy ecosystems such as Southeast Asia, a payment method like GrabPay can allow for an easier entry to the market."

Even though Grab strives to offer a sweeping platform of transportation and financial services, it must tweak this model in every region.

“Hyper-localization is our strategic advantage," Mehrotra said. "It’s not just localizing the app because anyone can do that. It’s actually hyper-localizing Grab itself."

This means investing not only in Grab's technology but in the infrastructure of each country in which it operates. 

GrabKitchen is one example of this hyper-localization. By creating a cloud-based delivery service, Grab is providing the infrastructure for restaurants to be able to expand.

By accepting both cash and its own mobile wallet, Grab has "all of the benefits of Uber without needing to have an established bank account or credit card," Crone said. "Layer in rewards and the prepaid account and it becomes an everyday necessity. Also, with Grab being so close to merchants, drivers and customers and with so little outside support from vendors it allows them to be hyper local.”

Inside the Grab ecosystem reside two units that supply the company with innovations. GrabVentures is an incubator for new Grab businesses, as well as at least one third party company —, which is focused on autonomous driving. 

Other businesses in the incubator include GrabWheels, which offers access to personal mobility vehicles in Singapore; Kitchen by GrabFood for restaurants that want to expand their franchise but don’t have the financial capital to do so; and GrabFresh, which is powered by Happy Fresh, a grocery delivery service available in Jakarta, Indonesia with expansion plans set for Kuala Lumpur, Malaysia, Bangkok, Thailand and more. 

This model has allowed individual countries to add unique services that meet the needs of the specific country’s population. 


An uncertain next step

Grab's success in serving a cash economy may not translate easily into building a digital economy.

Grab is relying on its GrabPay wallet for growth in Southeast as it follows a pattern of high mobile wallet adoption in cash heavy countries such as China, India, Indonesia, the Philippines and Malaysia. This contrasts strongly with slow mobile wallet adoption rates in card-centric countries such as the U.S. and those in Europe.

How Grab's app spurs cashless transactions

Cashless payments on the Grab app are between three and ten times higher than the country average in the markets where Grab operates

% of total cashless transactions in country
% of total cashless transactions on Grab
4 %
25 %
57 %
77 %
11.5 %
35 %
5 %
20 %
4 %
27 %
3 %
31 %
Source: Grab

The functionality offered by mobile wallets such as Alipay and WeChat Pay in China, Paytm in India, and GrabPay in Indonesia, the Philippines and Malaysia is tremendous, as for most users the only alternative has been cash. These wallets have experienced rapid and massive adoption because they provide the unbanked and underserved consumers with the ability to join the digital world, the safety of not having to carry a significant amount of cash and the opportunity to store funds in a bank-like account.

Alipay, for example, has over 1.2 billion active users globally and more than 900 million in China. Paytm has over 140 million active users in India and is investing over $100 million to grow that figure to 250 million by March 2020. GrabPay is the most popular mobile wallet in Singapore, according to a report from the iPrice Group, which examined 30 digital wallets in use in Singapore. While Grab does not provide the number of GrabPay users, it has confirmed that it has over 166 million mobile downloads of the Grab app.

The Grab app has seen a massive number of downloads

Source: Grab

In Southeast Asia, one of the biggest challenges to connecting the offline world to the online world is cash, or as some would say the symbolic anchor of cash. According to the World Bank, of all consumers who live in the Association of South East Asian Nations (ASEAN) region, which includes all eight of Grab’s country markets plus Laos, only 29% of workers reported receiving their monthly salaries through an account from a financial institution, while the remaining 71% are paid in cash by their employers. The ASEAN region has a population of 651.2 million, according to the CIA Fact Book.

“Many consumers in cash-heavy societies are shut out from taking part in global e-commerce," Phua said. "LPMs [local payment methods] like GrabPay act as a bridge to connect merchants all over the world with consumers who prefer not to pay with credit cards. This helps further unite global economies and is a win-win for both merchants and consumers.”

Since the Grab app can be used to make payments through the GrabPay feature, it caters to unbanked and other cash reliant users. It is similar to Alipay and WeChat Pay in China, Paytm in India and to a lesser degree PayPal and Venmo in the U.S. 

Grab has sought to expand beyond the basic functionality of a digital wallet by recognizing that many consumers wish to have access to credit. It has partnered with Citibank in the Philippines to offer the Citi Grab Mastercard. 

GrabPay also began offering a Pay Later feature in Singapore in March 2019. As with many Grab services, testing features such as Pay Later in Singapore holds the potential for a wider distribution.


Next target: Apple

In December 2019, Grab introduced Asia’s first numberless payment card, the GrabPay Card. Similar to the Apple Card launched in the U.S., the GrabPay Card carries no account number and is paired with a digital card for use in the Grab wallet. A key difference is that the Apple Card is credit-based, while the GrabPay Card is prepaid.

Uber is on the same path in the U.S. with the Uber Wallet, announced in October 2019, though it has more of a focus on drivers. Not only do drivers get faster wage payments and manage their accounts through Uber's app, they also get rewards for using Uber Wallet instead of a traditional plastic card.

This echoes Apple's strategy for its own virtual credit card. Apple originally rewarded consumers for spending within the Apple ecosystem, but has also expanded its rewards categories with partners — including Uber.

Apple's brief history in financial services hasn't been without issues — most notably, over concerns about gender discrimination in how it approves applicants and assigns credit limits. On a less serious note, its flashy titanium card can get discolored if kept in a wallet or pants pocket. 

Regardless of the severity of Apple's issues with its new credit card, each of those problems provides an opening for a rival to step in. And if Apple chooses to expand its product to other regions, it will have to play in the digital financial market that companies like Grab can claim to have built. 

As a numberless credit card, “I would call this trendy, but not yet a trend," said David Shipper, senior research analyst in the retail banking & payments practice at Aite Group. "A move to numberless cards is important because the mobile app now holds card data required for card-not-present purchases.  Previously all essential information for purchases was all available on the physical card, so this is another step away from the physical card and toward the mobile wallet.”

Grab is also very keen on pursuing a banking license to offer the types of bank services its unbanked and underserved clientele need. The company says it has no desire to compete with traditional Southeast Asia banks such as United Overseas Bank, OCBC or DBS Holdings by offering branches filled with bankers. By contrast, it teamed up with Japan’s Credit Saison financial services company to offer loans in its target markets to merchants; this partnership is emblematic of its approach to be more tactical and customized the needs of its ecosystem participants. 

Most recently, Grab announced that it is creating a venture with Singtel, Singapore’s mobile operator and a leading technology group,  to apply for a Singaporean banking license. The consortium will be 60% owned by Grab and the remaining 40% will be owned by Singtel.