Grab to launch retail investment product, consumer loans platform

Singapore

GRAB'S financial services arm, Grab Financial Group (GFG), is rolling out a micro-investment product and a third-party loan platform for its users. This follows the digibank-aspirant's suite of merchant financial services, launched last year.

The investment product, called AutoInvest, will allow users to invest sums as low as S$1 while spending in Grab's ecosystem. This comes after Grab announced the acquisition of Singapore-based robo-advisory startup Bento in February, which allows the group to offer retail wealth management solutions.

Users in Singapore choose how much they want to invest additionally per Grab transaction. The money is invested into fixed income funds offered by Fullerton Fund Management and UOB Asset Management.

The returns of an estimated 1.8 per cent per annum will be cashed out to the user's GrabPay wallet, which allows the money to stay within Grab's ecosystem. The company is exploring a feature that lets users cash out from their GrabPay wallet to their bank account in future.

Fees charged by managers of the underlying funds will be reflected in the user's in-app portfolio performance; these fees will work out to less than 0.45 per cent per annum. Grab takes a cut of the fund fees.

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Zennon Kapron, director of fintech consultancy Kapronasia, said that the nearly instant liquidity and minimum investment are attractive features.

"But the returns are still within the range of a typical Singapore bank's deposit interest rate, so from that angle, it's not as attractive yet. If they are able to widen the range of products to include those with a higher return, it could get very interesting," he said.

The invested sum can be withdrawn at any time, with no penalties, to spend on Grab services or at any merchant accepting the GrabPay Card. Grab does not charge any transaction fees for investing in the AutoInvest solution.

AutoInvest, which will be launched in early September, is not capital guaranteed.

Meanwhile, under GFG's consumer loan platform, users will have access to personal loans offered by licensed bank partners. Bank partners and GFG will integrate their application programming interfaces so users can securely apply for the loans directly within the Grab app.

The third-party consumer loan platform will be launched in Singapore later this year. GFG will disclose the list of licensed bank partners in due course.

Grab is offering third-party loans on its platform despite gunning for a Singapore digital full-bank licence with telco Singtel. Reuben Lai, GFG's senior managing director, explained that the gaps in the market are massive, and no one financial institution can address them all.

On the significance of the digibank licence, Mr Lai said: "When we launched GFG two years ago, our aim was really to unbundle banking products. But what we also observed was that as we launched each one of these products, (being a) digibank really does allow us to wrap everything, or rebundle everything, back together again in a more (meaningful) way."

Grab currently offers loans to merchants and micro-entrepreneurs. Together with its Indonesian e-wallet partner Ovo, it had close to 400,000 outstanding loans and financing solutions across consumers, drivers and merchants in the first quarter of 2020.

The company has continued to lend to small- and medium-sized enterprises throughout the pandemic, and has supported some of them by providing flexible repayment options, said Ankur Mehrotra, managing director and head of Grab Financial Services.

As Grab partially relies on high-frequency alternative data within its ecosystem, its credit scoring models are refreshed almost every month and has accounted for the effects of the crisis, he added.

GFG's "buy now, pay later" line of offerings will also be expanded on select e-commerce sites in Singapore and Malaysia in October. Eligible users will be able to shop online and pay in interest-free monthly instalments, or defer their payment to the following month. Merchants pay Grab a fee for this feature, which leads to larger basket sizes.

On the insurance front, GFG will roll out its first hospitalisation insurance plan for consumers in Indonesia in Q3 this year. Since April 2019, more than 13 million insurance policies have been issued by Grab's consumer insurance business.