• The cashless system will keep expanding and digitisation will accelerate, both of which help the lending side of the business from a data standpoint
• Grab Financial Group’s core motto is to serve the markets that still strongly rely on cash, with an end goal to build a strong merchant platform by partnering with banks
• SME financing is a key pillar of Grab’s growth strategy

Working rapidly and decisively during the COVID-19 crisis, Grab has seen nearly a 30% growth in first-time cashless users for food delivery between the months of February 2020 and March 2020. As of the first quarter of 2020, there are 387,000 active loans across its driver-partners, merchant-partners and consumers via GrabFinance. The company continues to work on solving key pain points for its merchants, and through its remote GrabPay link, Grab was able to get a significant number of merchants online.

In this interview, Grab’s Ankur Mehrotra further elaborates on the challenges that social distancing has brought on and what the company has been working on to improve its services across all of its businesses.

The structure of Grab Financial Group

Foo Boon Ping (FBP): The market for payments around the region is $500 billion and you have ride hailing, food, financial services and lending. How big is the Grab Financial Group (GFG) in terms of assets?

Ankur Mehrotra (AM): We are one of the largest groups within financial groups in Southeast Asia that has a complete set of financial offerings in fintech lending, e-wallet, insurance and our recently-launched wealth piece. We’re the only one that has an e-wallet licence in all the key countries or the key markets that we operate in – Indonesia, Thailand, Philippines, Malaysia, Singapore and Vietnam.

FBP: Is payments separate from the Grab Financial Group?

AM: Just a short background, a few years back, I was working in various different areas in transport, launching a few different businesses, which included our car financing or car rental business in the early stages. We raised considerable funds for that business.

Thereafter, we launched our payments business separately. Insurance and lending were then set up as two joint ventures.

We have lending with Credit Saison and insurance in partnership with Zhong An, China's largest digital insurer. Credit Saison is one of the largest consumer finance companies in Japan, and they're all productive in the funding space here in India. Credit Saison would be a great partner for us. It was 2018 when we launched both of these businesses. Payments was slightly earlier, but insurance and lending were operationalised around mid-2018 or so, months after inking the joint venture. We've seen amazing traction from both of these businesses during that time. Of course, payments is clearly getting a big chunk of growth and acceleration that we see across GFG.

But insurance has also been doing well in terms of growth and the trajectory that we have seen in that business. We have issued 10 million policies since our launch in April 2019.

There's so much synergy between insurance, lending, payments and the rest of our ecosystem – ride-hailing, food, delivery, groceries. That's what sets us apart. Grab Financial Group, as such, houses all these different businesses, whether it's a joint venture or 100% GFG-owned. This group is owned by Grab Holdings Inc.

FBP: Lending is a joint venture with Credit Saison and insurance is with Zhong An. Does that allow you to work with other partners?

AM: With lending, that's something we’re very specific about. We want to very much be an open platform, and that's a philosophy we will always have.

FBP: Are you free to work with other banks to provide the funding?

AM: We have to. As we scale, we’re talking hundreds of millions of dollars out for dispersal.

Initially, we were looking at partnering with banks in different countries, just getting the cars right, sharing some data, scoring, aggregating data to help them mitigate the risk and also give them access to a wallet. We would do the wallet deduction directly for drivers for the car payments. We found out that there was a massive credit risk mitigation that happened as a result of these wallet deductions that we provided. At the same time, the banks, generally in most markets, found it very difficult to wrap their heads around financing this segment of the population, mainly because a segment of the population does not have any history.

The kind of scale, impact that we wanted to have was very hard to realise – at least at the time, in 2016-2017. We started keeping some of the car assets directly on our balance sheet and then distributing it to the drivers. I was part of the team to launch the programme, and that was really the inception of when the thinking behind how we can launch and refine our GFSI or this lending business came about, which we call GrabFinance.

This GrabFinance business, the thinking behind how do we launch, what's the opportunity, how can we scale and can we do it, do we have a right to play in the space – all of that really was born out of that experience getting our car financing. The key aspect there was that we can manage the risk better. We know we have better data.

FBP: So, the borrowers or the lending are mainly for the drivers, the fleet or for the cars?

AM: Under our current programme, we are actually at car financing. The rental for fleet is separate, and we've done that to a certain extent. Of course, there's the supply issue. We can't provide cars to hundreds of millions of people or millions of cars per se. What we're focusing on is the small ticket size, purely digital fintech lending.

PayLater is part of it. We think about is as driver lending, in which we do cash loans, usage-based financing for smartphones, financing for fuel and a few other things for drivers. There are the merchants as well – mortgage financing, working capital financing and invoice financing. The third is PayLater for passengers, which will be accelerated in the coming quarters.

FBP: These are the main pieces. How big is it now in terms of the 300,000 borrowers?

AM: The biggest chunk in terms of borrowers are the drivers, because that's the core where we first focused on. We’ve piloted the PayLater product in Singapore and Malaysia, and we’re looking to grow that by partnering with e-commerce. That would really ride the wave of digitisation that we see happening for small and medium-sized enterprises (SMEs). SME financing is a key part of our growth strategy.

We would like our financing to be tied with our ecosystem as much as possible. However, we have done pilots and experimented with off-ecosystem straight-through for certain industry categories which we think will interface with our ecosystem at some point. For example, logistics, food and beverages (F&B), even if they're not on our platform. These are areas that, based on certain industry selection, we will open up to off-ecosystem, with the idea that they will be part of our ecosystem soon enough.

FBP: Logistics is part of the e-commerce ecosystem – delivery, warehousing, food and beverage in terms of food delivery – which has gotten traction as a result of COVID-19.

AM: There are a set of few other industries as well. I won't say we are completely industry agnostic, but we have a preference of certain industry from a credit criteria point of view. When we go into lending, our key hypothesis was we have an advantage through data. If we have that advantage data, we try to look at industries, propositions where that advantage could be strengthened in some way. For example, right now, that could just be a GrabFood merchant. That has taken off quite amazingly during this time.

Helping small and micro merchants get online

AM: It's unfortunate, the circumstances we are on, but there are certain parts of the business –such as GrabFood, GrabExpress and new propositions like GrabMart – where we are really helping these offline merchants get online.

This is one of the amazing things at Grab. We work very decisively and rapidly when taking action during a crisis like this. The organisation across our transport, food, express – all of these different parts of Grab – came together to solve key pain points for our merchants.

I would highlight bringing on small stores and merchants in GrabMart. Whether you're selling ice cream or daily essentials, bringing them online on GrabMart, leveraging the same platform we have for GrabFood was a fast way to give these guys a channel in markets like Malaysia.

In Malaysia, there was a pasar or Ramadan market that we had activated. Obviously, it was a traditional offline wet market, which cannot be hosted. We were the sole partner to bring them online. We really partnered with them to really be that light.

Financial services ties in there as well. Not only are we controlling these guys’ revenue – which is very important for my part of the business to understand and engineer these aspects – but we work actively with GrabMart, GrabExpress, these different businesses to make this happen. The second part is the remote link for GrabPay, which allows any of these merchants, even if they cannot come on our Grab app for whatever reason – because they have 1,000 SKUs or managing the app is difficult for them – they can use the link posted on Instagram and social media and accept payments.

The data points that we are gathering right now come through all of these exercises and this huge influx of merchants coming on. For example, a thousand merchants signed up for this in less than a week in Malaysia and about 400-500 in Singapore within the first week of us launching this. We had also done similar e-vouchers for restaurants and malls through the Grab app as well. Frasers Property was one of our partners for that. Over 1,300 merchants were listed on our app. A thousand vouchers were sold in an hour. It just flew off the shelves.

We always look at how we can support our merchants to grow, which is a key aspect from a revenue standpoint. The more visibility they have – with their top line digitally – the better it is for our lending underwriting part of the work, where we can underwrite in real time rather than ask them to send us three months or six months of financial statements. Of course, by having our wallet and our payment channel there, that allows us to also sit in the pot of cash.

A few months down the road when things hopefully are improving and the economy starts opening, these merchants and everyone will be super hungry for credit. Even now, they are hungry for credit and we’re supporting some of them, providing them growth capital. It is something that we are already thinking about how we can lay the groundwork for today.

For us, it's more about helping some of these micro merchants come online, and how they could bring about adjacencies to our customer base. The customer base that we have is a massive, highly active user base. They go online and order food multiple times nowadays through our app.

The impact of COVID-19

FBP: How has COVID-19 impacted digital transactions? One is commerce through the digital platform where you have delivery, payments and merchants on the platform, and that allows you to intermediate, so to speak. In terms of volume, could you share how has the crisis impacted your business?

AM: For food delivery, in certain days, certain countries, record numbers are going through the platform every day. Speaking with my Philippines team just this morning, every day, they are shattering new heights in total number of food orders, mart orders or delivery orders going through the platform. Same with GrabExpress, it has taken off. People are sending documents – now that they can’t go to the office – between colleagues. We are essentially utilising our core assets, which is this amazing driver-partner platform that we have. For us, it's not about thinking about new business or how we can get there. It's more about, ‘Look, we've got this strong base of driver-partners whose income through regular transport obviously dropped during the lockdown period. How can we give them alternative sources of income?’ Bringing them to these channels and other variances is the way to help them as well. We’ve seen record-breaking numbers in many cases across the board.

FBP: We know that the traditional ride hailing has come down, but GrabMart as well as GrabExpress have gone up, even financial services in terms of lending and insurance.

AM: Our payments, for example, we’ve seen double-digit growth in cashless transactions coming over the last few weeks. We expect that it will continue. We even hired many people. The cashless system is going to keep expanding and was supposed to go up by 2025. What we're seeing is the acceleration of that digitisation. That really helps the lending side of the business from a data standpoint.

We’re getting plenty of people who were previously invisible. Because they were cashless, they were invisible to the credit economy and to financial services. They still remain invisible to banks and financial institutions (FIs) to a large extent, because they may not be using credit cards, except in places without electronic means. Using all that will get you some visibility, as credit has increased.

It is high right now for insurance as well. Initiatives have been launched, like COVID-19 protection, and we see people being more conscious of their health and safety. We've seen the growth in cashless has gone up by double digits in transactions that go through our platform.

FBP: When you mentioned double-digit, is this in the 20s to 30s?

AM: It's hard to share the exact number of the scores. We see this quite volatile day by day and week by week. The key here is, that shift that we’re seeing, we think that that shift is here to stay. It's not going to go away necessarily.

FBP: We talked about there being the new normal. The way we transact, do business will change forever as a result, especially when you have users new to digital – not just from the user side, but also from the business side. For a long time, micro merchants have been quite reluctant to go online. Now, they know they need to have a digital presence for the survival of the business.

AM: Absolutely. That's a part that we've been focusing on, bringing these micro merchants online. In the financial services side, it gives us a massive opportunity. It's everything that we’re part of. As Grab Financial Group, we've been promoting and propagating. How do we help merchants get online? How do we create a cashless economy? Because that allows them to become visible. By becoming visible, that allows me and my risk heads to understand what's happening in the business, and then it allows us to underwrite that risk.

Especially in markets like Philippines, Thailand, Vietnam or Indonesia where bank penetration is still quite low, the sari-sari stores, pasars and warungs, they're all 100% cash-based. It’s hard to understand and underwrite that risk. They wouldn't have that access to the kind of banking infrastructure access to financial services. Bringing them online faster allows us to be think about how we can help them in the future to grow.

FBP: In onboarding, you need your team to go out and sign up merchants. With social distancing, are you able to do that 100% digitally?

AM: There are a few different parts. Across Grab, we are working very hard to digitise that journey as much as possible. That's how we could get 2,000 merchants onboarded so quickly, because it's all very self-service, easy to bring them on board. Of course, there are certain parts of that business that may still require some physical interaction in the onboarding part, but we try to minimise that as much as possible. The teams have been very successful over the last few weeks through iteration and through leveraging our engineering resources to make that happen.

On financial services and lending, we always had that vision of being straight-through digital with minimal human intervention. However, we also comply with regulatory requirements in different markets. In certain countries, they require a wet signature. We are working closely with regulators to amend that, especially during this time.

How does Grab Financial Group coexist with a Grab digital bank?

FBP: In Singapore, Grab and Singtel are joining in applying for the digital bank (digibank) licence. How does it impact the Grab Financial Group when the digital bank is set up? There are similar issues facing other markets, because other markets are also issuing digital banking licences. Would you exist as a financial group or a digital bank going forward in increasing the number of markets in the region?

AM: When we look at the digital bank as a business, we see that being synergistic to the rest of the Grab Financial Group. It is extremely synergistic to our lending business as well. We believe both parties will help each other with different key assets and know-how, with a very deep understanding of our customers. We've been offering simple, affordable and smartly placed financial services at different times. We’ve also offered user journey within our app and user journey through Grab over the last two, three years. That expertise would be very helpful for the digibank to grow and scale. Concurrently, the digital bank could be a great partner for us in building that expertise and securing funding.

Even through the COVID-19 period, we remain committed to building a digibank, and we’re really looking forward to that. The strategy of having a digibank plus all of our other financial services, which are adjacent to it and across different markets, will be very instrumental.

FBP: What are some of the initiatives of Grab? We know that Grab as a group is kind of providing millions of dollars of financial assistance to your drivers around the region. How are you helping them with credit in terms of working capital through this period? Governments around the region are also coming out with financial assistance, especially for the SMEs, where they provide very low interest rate loans to the bank and they also help share 90% of funding risk. Can you access those? Or, are those through the formal banking system?

AM: Those are through the formal banking system. We often look to partner with banks to help them in originating where we can. Our end goal is to support our ecosystem and build a strong merchant platform. If we can get a bank to come in and support these merchants who need that support during this time of crisis, we're very happy to bring them on board and work with bank partners to allow that.

Our lending side of the business will get involved where we can to bridge the gap. But, as such, we are again going back to the open platform philosophy. We want to work with banks, traditional financial partners, wherever we can and wherever there is interest and possibility.

FBP: The opportunity here, is it in developing markets like Indonesia, Philippines or Singapore? In Singapore, the formal banking system is quite accessible to a lot of SMEs.

AM: You'll be surprised. When we've done our research, there are various reports that would say there is more than $40 billion funding gap for SMEs in Singapore. Across the region, that's a much bigger number. In developing markets like Singapore, there is still a lot that can be done, and there's a big gap that needs to be addressed.

The challenge, even in Singapore, is in the underwriting, decision-making and bureaucratic processes of bringing an SME merchant on board to open a bank account, which has a series of documentation. In applying for a credit line, the process is longer. How we can help is in shrinking that process, digitising it.

The vision that we have for the lending business over time – by leveraging the data assets across platforms, not just our platform, but also to bureaus and elsewhere – is to understand the credit needs of small, micro merchants before they themselves even realise that need. That would be a seamless journey for a merchant.

In the future, we are looking at other partnerships that will allow us to get more data assets. These will build the whole 360-degree understanding of the merchant. Knowing when a merchant has a six-month cashflow gap, perhaps the merchant could use a credit line facility to draw down on when needed. Whether we do that on our own books or we work with bank partners, that is where we're very open to. Wherever there's appetite from bank partners, we will be very open to distributing that.

Survival in the post-COVID-19 world

FBP: When COVID-19 is over and when the lockdowns are lifted, some of these SMEs may not survive. How do you look at managing those risks?

AM: Most of the businesses will be immensely impacted. Much of this new normal is evolving and we have to work with it. There are various ways where some of these businesses can survive. As Grab, we are helping them through that process when they're adapting. How do we proactively divert some of our traffic and some of our business towards the merchants who come on board our platform? We need to make sure that our onboarding process, our offline-to-online process and all the technology there are completely ready to go and available for these guys. That is something we did very quickly to bring them online.

GrabPay had online acceptance as well for merchants that already have a website. Instead of cash on delivery (COD), they can accept payments online. In the future, we'll have credit facilities tied to that as well. One of the things perhaps that we're happy to share with you is there will be a PayLater online acceptance network that we are working on, that we will be launching as well. This e-commerce uptake and the need for credit as part of that user journey is going to grow as we go along.

Going back to your question, there are three key things. One is, how do we think about future-proofing ourselves? How do we make sure we are helping the merchants and ourselves survive while managing the risk?

We try to support them in the top line and cut costs as much as possible through lower fees. We're also very conscious of how else we can cut their costs through GrabExpress and other solutions that we provide. We'll continue investing in such solutions.

Increasing their upside, cutting their costs and entrenching them into our ecosystem allow us to understand them better and get more data, which will allow us to underwrite them better. Underwriting is just one part. I keep talking about bringing them into our ecosystem and entrenching them because of the regular score and the monitoring of these merchants as well. That is an important element in credit risk management.

Generally, the banks and FIs who would struggle through this phase are also the ones who do not see much information back from borrowers until the end of the month or until the borrower is repaying them. When there's a moratorium, their minimum and deposit (M&D) doesn't come, so you are flying blind for quite some time until those repayments are coming. Whereas for us, we have that minute by minute data of consumer demand, what the market sentiments are like and what is this merchant’s revenue. Is it trending, in which direction and how is it changing? We all know it's gone down, but is it? How much has it gone down? When would it trend back up? Those sorts of information would allow us to manage risk better and basically bring about, in a way, better financial services, better inclusion to this segment of the population.

FBP: What about Grab itself? Your senior management is taking pay cuts. You've been expanding very aggressively just before COVID-19 in many of the markets. You ran a collaboration partnership model. Also, in terms of attracting big active user base, up to the latest numbers of 166 million on your platform, what steps are you taking for the Grab Financial Group? We know that you are very strongly funded to the tune of almost $10 billion, but you've also invested quite a lot. On your official website, you contributed $5.8 billion to Southeast Asia’s economy. What steps are you taking on the Grab Financial Group aspect in t making sure that your cost is down and that you continue to grow sustainably?

AM: We're in a very strong position financially. In terms of the right investments and the right prioritisation that we had made early on, even prior to COVID-19, that's a journey we had started quite early in ensuring sustainable growth. Profitability is a key aspect of the group. There are some pockets, certain businesses in certain geographies, which are profitable. But of course, we are investing in growth per se as a group.

FBP: What do you think of the impact of digital banking framework being rolled out in the region? Would there be an acceleration towards enabling or facilitating electronic know-your-customer (e-KYC), digital onboarding or even funding capitalisation of digital players?

AM: The digital banking framework is, I believe, still progressing quite well. I don't foresee any major change to that. We're very eagerly waiting for the next steps on that space as well. We’re already investing and building on that part of the digibank, and we’re super committed to that space. That will allow us to serve our customers and partners better, so that's a key focus for us. But you asked a very important question whether this would make regulators think about e-KYC and the e-onboarding processes more. I certainly hope so and we certainly would like to think so.

There are many regulators who have already been studying or working on this. There have been numerous papers. They often engage us to have these discussions and forums, such as the G20, World Bank, IMF or the MAS-driven forums. We would certainly hope that the acceleration of that will really allow us to help the economy in a better way once we can bring about that level of digitisation. Earlier, I was saying what are some of the challenges to do a straight to digital process, e-KYC. Sometimes digital signature and sometimes certain jurisdictions are your key roadblock when there's no proper regulation around it.

FBP: In some markets, some of the bankers that we've been talking to, because of COVID-19, they have to close some of their branches for safety. Many say that once the lockdown is over, some of these branches may not open. They find that they can operate digitally and more customers are doing digital. As you’ve shared earlier, they are new to digital customers, they're increasing and they prefer the new way of interacting with the bank. So, that might change permanently.

One last question. In the beginning of the year, Mitsubishi UFJ Financial Group (MUFG) invested in Grab and obviously they got key investments in Thailand and in Indonesia, where they bought into the local retail banks as well. What are the opportunities can you talk about with the participation of MUFG in Grab as a stakeholder and as a partner?

AM: Even early on this year when we announced that we've been working with MUFG for quite some time to get to that position, we're very excited to have them on board. We find MUFG a very strong partner, especially as we start building our financial services space, the Grab Financial Group, which encompasses these different digibank and various offerings across lending, insurance and payments. MUFG has strong expertise and network across Southeast Asia as well.

In general, we like to work with multiple partners. So, with MUFG, it's given us a core partner in many of the markets. We're already working very closely with each other, with banks and with MUFG in Japan. There’s regular interaction to see how we can help each other and accelerate our growth in financial services, especially in these markets. Having said that, even prior to that, more recently we announced in Indonesia, for example, we had a partnership to roll out affordable loans and insurance coverage for our drivers, GrabFood and merchant kiosk partners.

Similarly, in Indonesia, we're also working with MUFG’s bank partner there, Bank Danamon. We like working with multiple partners and we love to learn from our partners. The space that we are operating in is such a massive space with such a huge gap, whether it's funding, the uninsured, payments or populations that are still on cash. The gap is so massive that the only way we can solve this is by working with many partners. We're always also looking for other partnerships where we can.