Piyush Gupta, CEO and director at DBS Group, kicked off a Money 20/20 conference in his hometown, Singapore, with a rousing and thoughtful take on how banks will remain relevant and competitive even as they lose visibility – comments echoed by other financial executives here throughout the day.
But as the bankers talked, Grab, the cross-town technology company that got its start as a taxi-hailing app in Malaysia, moved the needle by announcing the setup of Grab Financial, thus formally entering lending and insurance in the Southeast Asian markets where it operates.
Jason Thompson, managing director of GrabPay, said the company had entered a joint venture with Japan’s Credit Saison to establish Grab Financial Services Asia, bringing products to unbanked or underbanked people and small businesses. Grab considers its 5 million drivers as “micro-entrepreneurs”, and Grab Financial is positioned to give them access to capital.
“This joint venture serves small businesses, drivers, agents [i.e. mom-and-pop retailers], and at some point, consumers,” Thompson said. “We will make these people visible to financial services.”
The J.V. is partnering with U.S. insurer Chubb to provide data-driven insurance products to Grab drivers.
“We will look to work with more financial institutions,” Thompson said.
Powering Asian entrepreneurs
This extension of GrabPay, serving small-fry motorcycle delivery drivers and mom-and-pop kiosk merchants, may sound small. But today, those 5 million users of Grab’s app have amassed a $737 million loan book.
Anthony Tan, Grab’s founder, says the goal is to have 100 million “entrepreneurs” on the app’s books by 2020, forming the foundation of what could emerge as Southeast Asia’s biggest data pool. Grab Financial, by providing cheap, small loans and working capital, is a means of accelerating the tech company’s growth.
“Grab Financial is a platform to provide a chance for someone to grow their business,” Tan said.
Grab now operates in 191 cities in eight countries for ride hailing, and through its existing partnerships, provides payment services to 500 cities and towns. Shareholders include Vertex Venture Holdings (a subsidiary of Temasek), Softbank Group, China Investment Corporation, and Chinese ride-hailing tech player Didi Chuxing.
Grab is also partnering in Indonesia with Ovo, a digital wallet player, and conglomerate Lippo, to create an ecosystem so big that it attracts financial institutions wanting to partner with it, Thompson said. “The numbers are astronomical,” he said.
Gupta, in conversation with EY’s James Lloyd, said even as banks’ value chains are being unbundled by tech competitors, the challenge remains customer acquisition – and banks, of course, already have customers. But so do the biggest Chinese and U.S. internet companies. Grab, backed by some of Asia’s biggest capital providers, is trying to get into the same league.
DBS’s Gupta, recognizing the threat that banks are rendered “dumb pipes” as tech competitors cream the lucrative aspects of the business, tried to find the balance between becoming “invisible” behind partners such as retailers or telcos, and creating a brand as the power behind the service.
He cited the example of how chipmaker Intel launched a branding campaign to make consumers aware of the differences in buying a personal computer from a consumer brand such as Dell.
“The problem,” Gupta said, “is that you become so invisible that you don’t own the customer anymore.” With Intel as a benchmark, he said banks need to market the idea that a loan from a partner company – a ride-sharing app, say – that is “powered by DBS” would be a differentiator.
Invisible, but not too invisible
Gupta tried to balance the notion of the bank becoming invisible in a seamless transaction around a consumer’s lifestyle (“I want to buy a motorbike” versus “I want a loan to afford a motorbike”) and becoming so invisible the customer has no interest in what financial utility provides the money.
He says in the short and medium term, DBS branding on partners’ smartphone apps will remain important, until the point the bank’s marquee can fade because “when in the back of your mind you know it’s powered by DBS.”
Other bankers express similar ideas. Dennis Khoo, head of regional digital banking and strategy at UOB, says banks can compete against tech if they learn to focus on a great user experience online.
Leda Glyptis, chief information officer at Qatar National Bank, argues that tech companies’ speed to market will eventually slow as they foray into the heavily regulated world of banking.
Sanjeev Mehra, Citi’s global head of product development, says banks can continue to own aspects of data, particularly post-transaction, which helps them remain relevant.
Most pertinently, Derek White, global head of customer and client solutions at BBVA, said, “Trust is built by interactions with customers,” which generates data that can be used to create personalized offerings, reinforcing trust.
Trust was a theme raised by a lot of bankers. Banks are trusted; millennials will eventually come around to trust banks when they need serious financial services; fintechs and tech giants alike lack the compliance culture required in regulated banking.
All valid arguments. But what is it that Anthony Tan and Jason Thompson announced? It wasn’t Credit Saison or Chubb on stage boasting of a fintech joining their brand’s service offering.
The news was about a new company called Grab Financial Services Asia, and while both Grab and financial institutions will see value in working together, it’s going to be Grab’s name that those next 95 million entrepreneurs see – and trust. Bankers trying to avoid becoming “dumb pipes” still have their work cut out.