Ride-hailing company Grab launched Grab Financial, the firm’s new fintech platform on Tuesday, March 13, at the Money 20/20 event. This innovative platform may just prove to be a game changer for the banking sector, in the same way that the ride-hailing app upended the way people ride taxis.
The new fintech platform will make insurance, loans and other services available to South East Asian residents, including rewards and loyalty services, in addition to its financial, payment and agent services.
The target audience of Grab Financial are the unbanked who do not normally avail of traditional banking services. A venture partner from Jungle Ventures, Arvind Sankaran, thinks that while the implications of Grab’s new platform may not be felt immediately, but as time goes by, Grab would end up appealing to the mass market, which may threaten some banks since, Grab would need to lure engineers and data scientists from the traditional financial sector.
Making the new fintech platform possible is Grab’s joint venture (JV) agreement with Japanese consumer finance firm Credit Saison Co. The resulting agreement, called Grab Financial Services Asia (GFSA), is set to access the ride-hailing company’s datasets in order to offer alternatives for common credit ratings. “By analysing behaviour from the app, such as transport movements, geo-location, and GrabPay transaction data, the company can offer alternative data points to assess credit worthiness, filling the gap left by traditional credit scoring methods,” the company said.
The beginning of the joint venture will be all about offering financial services to people who work for Grab, such as agents, merchants and drivers. They can avail of loans for smartphones, working capital loans and other kinds of financing. Soon, credit scoring services to banks and other financial institutions will also be offered, so these institutions will be able to use the information to offer other services. There are also plans for the JV to later on be able to partner with financial institutions across the South East Asian region, and perhaps even all over the world, for providing financial services.
According to the managing director of Grab Financial, Jason Thompson, the joint venture will create the infrastructure that will promote financial inclusion. “Many in our region have no access to loans that they can use to purchase a new home or grow their small business. GFSA is building a reliable alternative to traditional credit scoring methods that is customised for the unbanked majority of consumers and small businesses in South-east Asia, which will create economic opportunity for millions across the region.”
Industry experts have focused on the granular data that Grab can provide to financial institutions, which in the past, only telecommunications organizations had access to. The chief of corporate accelerator JFDI.Asia, Hugh Mason, commented that whether we like it or not, private organizations, not just governments, will have access to our information, and these organizations would be sharing this information.
Mr. Mason also believes that innovations such as Grab Financial could be a threat to banks. “Ultimately, he who owns the data holds the power. My own view is that banks risk dying by a thousand cuts as cheeky fintech startups chip away at the edge of their offerings and steal the less regulated, easiest to copy businesses. So maybe ‘frenemies’ is the right word.”
Another industry expert, the group corporate communications head at OCBC Bank, Koh Ching Ching, believes that this new development empowers consumers by giving them more choices and hastens even more innovations. He pledged to innovate even further in order to be able to offer more services and products that would serve customers who have digital knowhow.
Grab has so far provided U$$737 million worth of capital to its agents and drivers in the South East Asian region, which includes financing for smartphones and consumer goods, with a default rate of less than 1.5 percent.
Aside from the joint venture, Grab announced another partnership with Chubb, a property and casualty insurance company. This partnership allows the company to offer insurance not only to its drivers but also to its customers. So far, insurance for accidents, hospitalization and other types of critical insurance have been offered to the 2.6 million drivers of the company.
These innovations make perfect sense for the company, according to Mr. Dankaran of Jungle Ventures. “It has a strong base proposition, a regional franchise, big and relevant data such as driver and rider income, cash-outs, user ratings and telemetry, to build robust alternative credit scores that can help scale lending sensibly to the middle economy.” Aside from this, Mr. Dankaran asserts that the joint venture covers the company’s need for underwriting expertise, and the partnership with Chubb offers insurance options that serve the company’s customers well, and even broadens its base.
The head of Singapore-based, Credit Saison-backed payments startup MatchMove, Shailesh Naik, has emphasized the need for expansion of the market for lending in the region, and that the new joint venture will have far-reaching implications in terms of financial inclusion. He said of the partners, “Grab is a good brand and has a vast base of drivers. Credit Saison has decades of experience in building lending models.”
He also said that Grab would soon need to expand their market, since at the moment it is only made up of agents and drivers so far. He also warned that as the venture would go into South East Asia, dealing with the different frameworks and regulations may be challenging.