The lion’s share of Grab’s revenue still comes from ride hailing and food delivery, while we are more interested in its digital financial services business. We think that digital banking offers greater potential than mobility and deliveries for Grab to develop high-margin revenue streams, especially if it can successfully introduce products adjacent to payments but which are more profitable. To that end, in the third quarter, Grab’s fintech revenue rose 156% year-on-year to US$50 million – that’s less than 10% of the company’s overall revenue – on the back of better monetization of its payments business and higher contributions from other services such as lending.
Lending is indeed something Grab should look to grow aggressively, and it seems to be trying. The company said in an earnings statement that loans disbursed to its “ecosystem partners continued to gain traction.” In the nine months to September 2023, Grab’s total loan disbursements expanded 52% on an annual basis to reach US$1 billion, while total loans outstanding amounted to US$275 million at the end of the third quarter.
As for customer deposits at GXS Bank in Singapore, they reached US$362 million at the end of September. Grab has benefited from the Monetary Authority of Singapore’s (MAS) recent decision to lift a deposit cap on the city-state’s digibank startups. Previously, customers could deposit a maximum of S$5,000. In July, the MAS raised that limit to S$75,000.
It is important to put Grab’s total deposits in perspective though. It will need a much larger deposit base if it expects to build a serious lending business. For instance, South Korea’s Kakao Bank is one of Asia’s most successful online lenders and its deposits had reached about US$25 billion by the end of 2022. Its competitor K Bank had about US$11 billion in customer deposits at the end of last year.
Perhaps Grab believes it can learn from Kakao’s success, because in September, the latter took a 10% stake in the Indonesian online lender Superbank backed by the Singaporean platform company and Singtel. In its earnings statement, Grab said that the strategic partnership would allow Superbank to tap into Kakao Bank’s “expertise and proven competitiveness in digital finance to collaborate in the development of products and services, and drive digital banking innovation in Indonesia.”
Separately, we are closely watching the third piece of Grab’s digibanking trifecta – GX Bank Berhad (GXBank), which was the ﬁrst of the ﬁve digital bank license applicants to receive the approval to launch operations from Bank Negara Malaysia, following the successful completion of an operational readiness review. Malaysia is not wanting for financial inclusion given that 92% of its population has a bank account, but depending on how one defines the “underbanked” demographic there, both retail and B2B opportunities do exist.