Unrelated Sphere - It is not a "given" that consumers using Grab’s other services could be converted, especially since the ride-hailing and food delivery spaces where it dominates are unrelated to the retail investment sphere. Frequent users of the Grab prefer other more established platforms for their investment needs.
Critical Mass - Singapore is a small market, and given a low propensity for the general population to invest, it would therefore be tough for such micro-investment channels to achieve critical mass to make the business sustainable.
The analysts were giving their comments yesterday after Grab informed its customers a day earlier that it was discontinuing its two investment products — AutoInvest and Earn+ — and will not be accepting new deposits for them.
Users need to fully redeem their investments before Oct 13, or Grab will redeem them on users’ behalf at the prevailing market price and return the proceeds to their GrabPay Wallet.
This decision follows an extensive review, which concluded that the business would not be commercially viable. This announcement came not long after financial advisory firm MoneyOwl announced last month that it would be winding down by the end of the year. It used to offer services such as low-cost financial planning and investment in low-cost funds.
AutoInvest - was launched in 2020 and Earn+ was rolled out by Grab two years later. AutoInvest allows users to set aside as little as S$1 for investment purposes from what they already have in their digital GrabPay Wallet.
Users who opt in to the service will automatically invest a chosen amount when they take a ride with Grab, order from GrabFood or pay using the GrabPay Card. The money is invested in fixed-income funds managed by asset management firms, for instance, and was touted to potentially earn returns of an estimated 1.8 per cent per annum. The returns cannot be withdrawn as cash but are channelled back into Grab’s ecosystem of partners for transactions.
Earn+ allows - users to put money into their GrabPay Wallets and earn interests of up to 2.5 per cent a year. Based on data from its latest quarterly financial results in August, Grab has 34.9 million monthly transacting users, though no breakdown by country or products were published. The company was hoping to tap its captive user base for this venture to float.
Taking-Off - Regular users of the Grab app in Singapore said that they were not keen to take up the investment products despite being aware of their existence. There are just many other options that Singaporean finds more well-established and have more expertise (when it comes to investments).
Another factor hindering Grab’s attempt to enter the investment sector is that not everyone wants to be an investor. Investment is not like taxis (or private-hire transport), where everybody wants a taxi every day. Very few people do investments in the world in any given country, and the fraction of people who invest is from 8 to 12 per cent.
MoneyOwl - This low propensity may also partly explain why MoneyOwl had to wind down. On its website, MoneyOwl said that its financial advisers do not earn commissions, “giving them no incentive to hard-sell or promote unsuitable or unnecessary products.
Financial investing is not a natural activity for many of us because we need to reduce our current expenditures or consumption to put money in for the future. Without a lot of hard-selling of investment products, “many people don’t consider it”.
Sustainable - For the micro-investment model to be sustainable, the service provider must be able to reach critical mass. Given Singapore’s small population, it might make it more challenging for Grab to have reached the critical mass. Low-cost investing market is very much winner-takes-all due to the need for massive economies of scale.
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