Not long after Uber’s pugnacious founders first tested their app among San Franciscans, a pair of Harvard Business School classmates from Malaysia seized upon a similar idea: They wanted to build Uber, but for Asia. In 2012, they launched a ride-sharing service with 40 drivers in Kuala Lumpur. Eventually, they settled on the name Grab.
Six years later, Grab dominates the ridesharing market in Southeast Asia, boasting 2.3 million drivers in 168 cities across eight countries. Last year, the company raised $2.5 billion from investors, including Softbank, the Chinese ridesharing company Didi Chuxing, and Hyundai. This recent round of funding valued it at $6 billion, making it the most valuable tech startup in Southeast Asia. Despite Uber’s aggressive investment in the region, it has struggled to best Grab. That’s in part because of Grab’s cultural advantage. While Uber has spent close to a decade figuring out what Western users want out of a ride-service, the company has struggled to adapt its findings to parts of the developing world. By contrast, Grab has solved a puzzle facing companies in places that are just coming online: How to make e-pay work in nations that lack financial infrastructure.
Uber has spent close to a decade figuring out what Western users
want. In the developing world, it is struggling to adapt.
For co-founder Anthony Tan, the transactions Grab facilitates represent the future of his company. We are sitting in the booth of a hotel restaurant in Davos, Switzerland. Tan, 35, who is the son of one of Malaysia’s largest automobile distributors, wears a cross and a ring on a chain around his neck. He pauses over his noodle dish as he describes the company’s bustling Singapore headquarters, where he and cofounder Hooi Ling Tan (no relation) have recruited an army of young coders that include alumni of Facebook, Amazon and Google.
They’ll need that army. In Southeast Asia, the ride sharing wars have escalated into an arms race for money and talent. Since Uber launched in the region in 2013, the company has sunk millions of dollars into recruiting riders and drivers. Meanwhile, local competitor Go-Jek enjoys a strong market lead in Indonesia, where it is based, and recently raised $1.2 billion in a funding round that included Google as well as Chinese companies Tencent and JD.com and the Singaporean sovereign wealth fund Temasek. Dominating ride-share in Southeast Asia comes with significant economic opportunity. According to a December report co-authored by Google, spending on ride-hailing apps in the region has more than doubled over the past two years to $5 billion, and is expected to reach $20 billion by 2025.
So far, local companies seem to be winning. Despite its huge investments, Uber continues to lose money as it strives to match the discounts and promotions competitors are offering riders and drivers in the region. Speaking at the New York Times Dealbook Conference in New York last fall, new CEO Dara Khosrowshahi addressed the company’s business in Southeast Asia, saying the market was over-capitalized. “We’re going in, and we’re leaning forward,” he said. “But I‘m not optimistic that market is going to be profitable any time soon.”
Citing a source close to Grab, Reuters reported in November that Uber may look to partner with Grab, as Khosrowshahi moves to cut costs in advance of a possible 2019 initial public offering. There’s precedent for this. In 2016, as Uber bled money in China, the company sold its China business to Didi Chuxing in exchange for a 20 percent stake in the merged operation. Now that Uber has completed its Softbank deal, the two companies share a significant investor, which could pave the way for a similar future partnership. Both Uber and Grab declined requests for comment on the speculation.
It’s clear that Uber’s one-size-fits-all app, even when customized for local markets, has had to play catch-up with Grab’s app, which reveals a more sophisticated understanding of the needs of drivers and riders, in countries like The Philippines and Vietnam. When Grab first launched, it had to teach drivers in many of its markets how to use smartphones. The company held sessions every two weeks to train them to use the app. Most riders didn’t have credit cards, so from the very start, Grab accepted cash. It took Uber two years to begin accepting cash in some parts of the region.
So when people throughout the region got their first smartphones, they became comfortable using Grab to hail a car—or a motorbike, a van ride, or even a trike. That’s when Tan introduced the idea of using the app as a digital wallet. In a nascent internet economy, in which ecommerce will eventually dwarf ride-sharing, Tan believes using his technology to facilitate transactions has great potential. His greatest competition in the region, Tan tells me, isn’t other transportation networks. “Our biggest competitor is cash,” he says.
Eighteen months ago, Grab began enabling riders to load money into their app via credit cards, online banks, local ATMs and even a group of convenience stores that participate in an over-the-counter digital wallet service called GrabPay. Since then, the company has been purchasing fintech startups and opening research and development centers dedicated to growing its payments service.
Last fall, Grab began enabling peer-to-peer payments (think Venmo) and then allowing other merchants to accept GrabPay. The service works a lot like the Chinese payments service Alipay: people scan a merchant’s QR code, key in an amount, and hit the “pay” button. The company began in November with 25 restaurants and food stalls in downtown Singapore, but quickly announced plans to spread the service across the region throughout 2018. “You can walk into a MacDonald’s in Singapore right now and redeem Grab loyalty points to buy a burger,” boasts Tan.
Of course, many other startups are chasing the same opportunity in Asia. Go-Jek introduced GoPay in 2016, and the Indian ride-sharing service Ola, which is also backed by Softbank, has run a standalone service called Ola Pay since 2015. But to a group of increasingly connected Southeast Asians, Grab has the opportunity to be the gateway drug to digital experiences. With luck and a good deal of sweat, it is well-positioned to be the brand residents trust enough to carry their children to school—and their money everywhere.
Uber’s Global Sell