Grab expands into lending in Southeast Asia via new venture

By Aradhana Aravindan and Anshuman Daga

SINGAPORE (Reuters) - Southeast Asia's Grab has teamed up with Japanese credit card company Credit Saison Co Ltd to provide loans and lending services in the region, marking the ride-hailing firm's biggest expansion into financial services.

Their new joint venture firm, Grab Financial Services Asia, will offer micro-financing products and leverage Grab's network of millions of consumers and small businesses as well as data on consumer behaviour, blending it with Credit Saison's expertise in credit analysis and consumer lending.

The move comes as Tencent's WeChat Pay and Alibaba Group's affiliate Alipay expand into Southeast Asia - home to some of the world's fastest-growing economies with about 640 million people and an active mobile user base.

Financial details of the venture were not disclosed.

"Grab Financial Services Asia is building a reliable alternative to traditional credit scoring methods that is customised for the unbanked majority of consumers and small businesses in Southeast Asia," Jason Thompson, director of Grab Financial Services Asia, said on Tuesday.

Grab already offers services ranging from payments to rewards and loyalty services.

Grab operates in eight countries in Southeast Asia and says its app has been downloaded on over 86 million mobile devices. It offers ride-hailing, on-demand food and delivery services through its 2.6 million drivers.

Start-ups Grab and Indonesia's Go-Jek have raised hundreds of millions of dollars and boast an estimated valuation of $6 billion and $5 billion, respectively.

"You can imagine these guys much like WeChat in China, you can imagine them beginning to move into more and more adjacencies until such time as your Go-Jek or your Grab app becomes your primary application that you do a range of services through," said James Lloyd, Asia-Pacific fintech leader at EY.

Analysts expect a boom in digital financial services in Southeast Asia, especially Indonesia - where the majority of its 250 million population don't have bank accounts.

"The problem in Indonesia today is that the middle economy actually has no financial services," Grab Financial's Thompson said in an interview.

"All the things that you know so well around credit history, credit scoring, none of this is available," he said. "In the world of lending, that has to be our differentiator."

Grab is betting that its data on transport movements, GrabPay transactions and consumer behaviour will help in assessing customers' creditworthiness.

A Google and Temasek study late last year forecast that Southeast Asia's internet economy would exceed $200 billion by 2025, from an estimated $50 billion in 2017.

Grab, which started as a taxi-hailing app firm and competes with Uber, has been expanding into financial services over the last two years, partly by acquiring companies.

The company says it has facilitated over $737 million in loans over that period for drivers and agents, with a default rate of less than 1.5 percent.

Grab's new venture will offer credit scoring services to financial firms who can use the information for services such as virtual credit cards.

(Reporting by Aradhana Aravindan and Anshuman Daga; Editing by Edwina Gibbs and Muralikumar Anantharaman)