Singapore's Grab Draws $2.5 Billion to Bolster Ride-Hailing, Payments Services - eMarketer

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Singapore's Grab Draws $2.5 Billion to Bolster Ride-Hailing, Payments Services

Japan’s SoftBank and China’s Didi Chuxing will lead the investment round

July 25, 2017

Southeast Asia’s ride-hailing sector is shaping up to be a massive proxy fight between some of the largest tech companies operating in the region.

This week, Japanese telecom SoftBank Group and Chinese ride-hailing giant Didi Chuxing entered the fray as the two lead investors in a $2.5 billion funding round in on-demand transportation service Grab, which is based in Singapore but currently operates in 65 cities in seven markets across Southeast Asia.

SoftBank and Didi’s investments combined will contribute about $2 billion of that money, with the remainder of the funds coming from a mix of existing and new investors.

Ride-hailing apps like Grab and rival Go-Jek, which is headquartered in Indonesia, have emerged as the potential gateway for many new internet users in Southeast Asia to adopt digital services. In several markets, these firms initially drew users to their platforms by offering on-demand motorbike taxis that could more easily navigate the gridlock of the region’s heavily populated urban regions.

Grab claims that its app has been downloaded 50 million times, and that 1.1 million drivers work for its service, helping to facilitate nearly 3 million rides daily.

February 2017 data from AIP Corporation shows how close the competition is among ride-hailing services in Southeast Asian markets like Vietnam. It found that one-third of consumers used an app designed to work with traditional taxis, while 30% used Grab. Some 28% used US-based Uber, another strong player in Southeast Asia’s ride-haling sector.

Top 5 Ride-Sharing Services Used by Consumers in Vietnam, Feb 2017 (% of population)

Ride-hailing services in Southeast Asia have also smartly expanded to include a number of other features, chief among them mobile payment services. These types of services are going to find a large number of users in developing Southeast Asian markets where an emerging consumer class is likely to skip the step of adopting credit and debit cards for payments, in much the same way that consumers in China have.

In a statement on the new funding round, Grab CEO Anthony Tan made clear the company’s designs to improve its mobile payment service. “Grab will achieve an unassailable market lead in ride-sharing and build on this to make GrabPay the payment solution of choice for Southeast Asia,” he said.

Grab has already funneled resources toward attracting this new group of digital payment users. In April, the company acquired Indonesia payment service Kudo, which targeted the unbanked and underbanked population in the country by letting them process payments offline through a network of some 400,000 agents, or intermediaries, scattered across the country. The company has already folded Kudo’s operations in Indonesia into its own, with the service now operating under the GrabPay brand.

Rival Go-Jek has invested in efforts to grow its own digital payment service, GoPay, which launched in April 2016. Go-Jek has also found a benefactor in China’s Tencent, the parent company of popular messaging service WeChat. According to reports, in May 2017, Tencent led an investment round thought to total about $1.2 billion in Go-Jek.

Now Grab can boast of its own heavyweight investors in SoftBank and Didi Chuxing, the dominant ride-hailing company in China. Grab surely plans to draw on Didi’s experience outlasting its rivals in China; the company is credited with forcing Uber to abandon its efforts in the country in 2016, citing unassailable business and regulatory hurdles.

Grab is also likely looking to capitalize on widespread criticism of Uber’s company culture—along with its ongoing leadership troubles—to gain an advantage in Southeast Asia.

—Rahul Chadha


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