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Responding to 'pent-up demand' in Southeast Asia for transport, mobile payments

? Southeast Asia is a prime market for transport and payment platforms

? Local teams are empowered to pursue individual strategies in different markets

? Developing region is still waiting for a home-grown tech giant to emerge

Singapore-based Grab runs one of Southeast Asia's most popular ride-hailing apps. The company launched in 2012 under the name MyTeksi and now operates in Singapore, Malaysia, Indonesia, Thailand, Vietnam and the Philippines. Its services range from multiple car, motorbike and bus transport options to mobile payments.

S&P Global Market Intelligence spoke to Ming Maa, group president of Grab, about the startup's rapidly expanding operations and how they are tailored to the region's varied markets. Below is an edited transcript of the interview.

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Ming Maa is group president of Grab. He previously helped oversee ride-sharing and e-commerce investments for Japan's SoftBank Group Corp., one of Grab's financial backers.

Source: Grab

S&P Global Market Intelligence: The ride-hailing industry is extremely hot in Southeast Asia right now. Why is that?

Ming Maa: There's a huge amount of pent-up demand for ride-sharing and ride-hailing services in Southeast Asia that is only now starting to be unleashed. Car ownership in the region ranks among the lowest in the world; there are 70 cars per 1,000 people in Southeast Asia, compared to 103 in China and 574 in the U.S. At the same time, populations and cities have been expanding so rapidly that existing public transport networks and infrastructure aren't able to keep up.

How does Grab distinguish itself from market rivals such as Uber Technologies Inc.?

We transformed our app into a multimodal service platform. For instance, someone might take a GrabBike for an inexpensive ride to work, hail a GrabTaxi later in the day when it's raining, and call a GrabCar Premium for a night out. One in three customers use more than one service.

We work closely with local stakeholders to ensure that we are not working at cross-purposes. We recently launched our Grab for Indonesia master plan, a commitment to invest $700 million in Indonesia up to 2020. In Singapore, we've partnered with a number of local companies to give taxi drivers access to Grab's passenger base, and make getting a ride easier for Grab customers.

What are the advantages of being a locally grown service in the region?

Southeast Asia isn't just another huge, rapidly growing market with huge potential; this is our home. Because we know the region so well, we recognize that there is no "one-size-fits-all" solution to building a company and a service. Our country teams are locally embedded and empowered by our headquarters to make decisions and pursue opportunities unique to their own markets.

How are startups like Grab able to gain traction in countries that are still developing technologically?

We see every challenge as an opportunity. For example, Southeast Asia has a low rate of credit-card ownership and a lack of a uniform payment system other than cash. In response, we are building the first pan-Southeast Asian mobile payment platform, kicked off by our launch of GrabPay last year, which is now a rapidly growing business line.

Taking mapping as another example, matching and routing is a challenge given the lack of a uniform mapping solution. To overcome this, we invest heavily in our mapping technology for each market, which improves pickup times and makes better recommendations for pickup and drop-off locations.

What is your strategy for addressing the varied needs and regulations in each market?

Transportation is a very local problem that requires very specific, localized solutions. Pain points are different in each market, and, as such, we need to tailor our approach and solution. Our GrabBike service is a good example. In many of our markets, two-wheelers are the most popular and convenient way to get around, and we knew that we were missing a significant segment by relying on taxi-hailing and car-sharing. GrabBike is now one of our fastest-growing services, growing by 600% in Indonesia in 2016.

What was the reasoning behind adding bus-booking services such as GrabCoach and GrabShuttle?

We recognize that there is still a large group of commuters who are willing to pay a few extra dollars on top of regular bus fares to enjoy greater comfort, accessibility and speed.

GrabShuttle is also a great example of how the government and the private sector are working together to solve urban mobility problems. The app is integrated with the Singapore government's open technology platform, which allows commuters to "crowdstart" new routes and links housing complexes with Mass Rapid Transit stations and underserved locations, such as industrial estates and schools.

How much potential is there for further growth in the region?

The Southeast Asia growth story is nowhere near its peak. The region is starting to develop on a rapid scale – it's a perfect storm where public transport is trying to catch up to the needs of its population, which is growing larger, more affluent and more urbanized. This is a region where internet penetration is growing from a low base, and there are not yet any leading companies.

There is a huge, as-yet-unrealized opportunity in the payments space. Regional credit-card penetration is less than 10% outside of Singapore, and we are uniquely placed to leverage this opportunity.

What other services is Grab looking to add, and what other regions may it expand to?

We will continue to expand GrabPay and scale up our back-end engineering and data analytics teams.

We don't have any plans to look outside Southeast Asia at the moment. We feel there is still a lot of new ground to cover in the region and still more ways to better serve our markets.