Challenging The Traditional Bankers

Alibaba and Tencent have demonstrated that the world of payments is no longer the exclusive territory of banks. Their model is now gaining traction in southeast Asia, where a Singapore-based, Indonesia-focused transport platform and a Malaysian budget airline announced plans to move into financial services within three days of one another. 

Singapore’s Grab and Malaysia’s AirAsia announced the launch of Grab Financial and BigPay respectively, joining Indonesia’s motorbike-based ride-hailing firm Go-Jek, which acquired three local fintech firms in December and combined them into its Go-Pay brand. All three institutions made landmark presentations at the Money 20/20 conference in Singapore this week. 

Grab’s move is not surprising, and indeed Euromoney predicted it in 2016, since the Singapore-based ride-hailing service has talked for at least two years about the lack of a universal payments platform in southeast Asia and has had a payments business through its GrabPay brand throughout. It was already partnered with Bank Mandiri in Indonesia, Lippo Group, Alipay and Citi, the latter in a scheme allowing card customers to burn loyalty points in exchange for taxis. 

However, the scale of Grab Financial at launch is impressive. In addition to the existing payments, loyalty rewards and agent network services, it includes a joint venture with Japan’s consumer financing company Credit Saison to provide loans to unbanked individuals, micro-entrepreneurs and small businesses, called Grab Financial Services Asia; and a partnership with Chubb to provide in-app insurance, initially for Grab’s 2.6 million driver partners. “I’ll be honest, a year ago I didn’t think I’d see a slide with Credit Saison and Grab on it,” says Jason Thompson, managing director, GrabPay southeast Asia.

“But this shouldn’t come as a surprise. We have been developing financial services for some time now. We will serve micro-entrepreneurs, agents, merchants, drivers, and in the future consumers, I’m sure.” Much like the Chinese heavyweights, the key to the whole thing is the vast accumulation of data the company has gathered about its customers. “Our data platform is unparalleled,” Thompson says. 

“We will leverage big data to provide formal scoring and lending services.” He says Grab has already built a $737 million loan book to drivers, and says that even in Indonesia the default rate is below 1.5%. It was a bigger surprise to see AirAsia, the budget airline owned by Tony Fernandes, enter financial services through its new digital payments platform BigPay. 

This starts life as a mobile wallet that can store up to 10 credit and debit cards, and will offer its own top-up cash card in a partnership with MasterCard. Again, the rationale is the trove of data an airline has on a large number of people. “AirAsia is a data company, it’s a tech company,” says Christopher Davison, group CEO and founder of BigPay. “It has carried 65 million people, and with that comes high-resolution data. “When you get in an airplane, you put in your passport number, your date of birth. You can be predictive around where people are travelling, who they are.” 

He adds: “It is a fintech’s dream: high-resolution data, low cost of customer acquisition. It is one of the biggest databases across southeast Asia. Tell me another homegrown company that has customer data in Thailand, Indonesia, the Philippines, Malaysia, and growing in China and India.” 'Challenger bank' Calling BigPay a ‘challenger bank’, Davison says it had launched in Malaysia with a full e-money licence. “There aren’t really any challenger banks in southeast Asia,” he says. 

Fernandes says AirAsia will move towards cashless cabins, with the aim of all in-flight purchases eventually being made through BigPay – a process which will also require the airline to install wifi connectivity on its planes. However, the e-wallet will be used on the ground too. One service will be low-cost foreign exchange. Eventually he expects to offer cross-border remittances and online lending. 

The conference also featured an update by Aldi Haryopratomo, chief executive of Go-Pay. Haryopratomo’s social enterprise Mapan (previously Ruma) was bought by Go-Jek in December. This is a different model: Mapan grew up at a grassroots community level and has a million families across 100 cities in Indonesia as members of its savings and loan platform. 

It has recruited and trained more than 10,000 low-income entrepreneurs in Indonesia, 85% of them women, from as basic a level as pooling resources in a community to buy cooking pots. “Financial services is not about loans,” says Haryopratomo. “People need pots, not loans. Because we go to communities and give them a path to market, teaching them how to package and produce, then they become ready for financing.” 

He began a pilot scheme working with families where one member of the family is a Go-Jek driver and the other a leader in the social enterprise business; the idea is that this can work nationally by combining Go-Jek’s urban reach with Mapan’s strength in rural communities. 

The group is now partnered with banks including BNI, BRI, BTN, Maybank, Mandiri and BCA, with BTN, for example, providing housing loans to Go-Jek drivers.

Financial inclusion is also at the core of Grab’s ambitions: the presentations by Thompson and by Grab’s CEO Anthony Tan were at times almost tearful, peppered with examples of Indonesians reaching financial stability through access to basic banking services. 

Last year, Grab acquired online-to-offline ecommerce platform Kudo in Indonesia, and believes its agency force – 400,000 people in 500 towns and cities – will deliver a grassroots reach similar to the one Go-Pay describes. “Our reach is astronomical,” says Thompson. 
Still, behind the scenes are investors who will be expecting a substantial return on these altruistic endeavours. Go-Jek’s backers include Tencent, Google, JD.com, KKR and Warburg Pincus; Grab’s latest funding round, which commenced last year with expectations of raising $2.5 billion, included SoftBank and Didi Chuxing as lead investors. Temasek has invested in both.