Move over Uber: Asia's gig innovator Grab pulls ahead in the fintech race

Companies that aspire to be the Uber of their industry should take a second look at the ride-sharing market, where Grab has become a lightning rod of payments investment and innovation.

The Singapore-based ride-sharing company is attracting some of the world's most well-heeled fintech technology investors, including a reportedly hefty investment from Alibaba. Grab was valued at $6 billion as of late 2017, double its $3 billion valuation from 2016.

Though this is far behind Uber's valuation of $72 billion, Grab is ahead of rival Uber in building out horizontal payments and financial services off of its core ride-sharing business. In the past year, Grab has become a portal into the broader economy for contractors, part-time workers, freelancers and other members of the gig economy.

"I don’t think that a processor needs necessarily to have a 'ride share' offering to be viable, but I do think that a 'gig economy' or marketplace capability is getting really close to a core requirement for online payment processing," said Thad Peterson, a senior analyst with Aite Group.

Late in 2017, Grab launched a mobile wallet app, turning its ride-sharing base into a potential merchant acquiring powerhouse. GrabPay has already made inroads among Singapore's restaurants, shops and marketplaces as it plots expansion to other markets.

In January, Grab acquired iKaaz, an Indian mobile payments platform that supports NFC, QR codes and other forms of contactless and online payments. iKaaz allows Grab to pair ride-sharing with P2P, bill payment, in-app mobile and retail payments.

Uber is, of course, no slouch — it recently launched a debit rewards card for drivers, a fleet card for Uber Freight clients, and a consumer credit card that can be obtained and managed within the Uber app. It also applied for an e-money license in the Netherlands last month.

These efforts still fall short of Grab's ambitions with projects like Grab Financial, which supplies lending and insurance via partnerships with Credit Saison, a Japanese consumer finance company; and Chubb, a property and casualty insurance company. Grab is also attempting to get regulators to approve its acquisition of Uber's Southeast Asian business.

Grab's app is used 5 million times daily in Southeast Asia and has been downloaded 90 million times.

Alibaba and Grab did not return requests for comment, but TechCrunch reports Alibaba is in the early stages of an investment following initial talks last summer. Alibaba would join Softbank as major Asian companies to invest in Grab.

Alibaba also made a major investment in Ele.me, a Chinese food-ordering company that has also doubled in value in the past year. By investing in Grab, Alibaba would gain exposure and potential partnership and integration with a company that's expanding in all of the areas financial institutions and e-commerce companies want to see expansion.

With these investments, Alibaba is moving deeper into the sharing economy as it keeps pace with rival Tencent, which works with China's other large food delivery apps and in 2017 made an investment in Go-Jek, one of Grab's rivals in Asia.

Many of Ele.me's clients are smaller restaurants, or even private kitchens that take advantage of China's soft restaurant regulations to use the Ele.me app to become their own restaurants. Like its rival Uber, Grab is a gig economy powerhouse since it almost entirely relies on contractors and provides and on-demand service for consumers that can be easily paired with other revenue-generating activities.

"The big [Asian] payment players have been tying in or partnering with practically everyone to establish horizontal leverage, which means that merchants and on-demand services such as ride-hailing are prime candidates to be part of the major apps' ecosystem," said Raymond Pucci, associate director of research and consulting services for Mercator Advisory Group. "Most Asian nations find consumers doing anything and everything with their phones, especially financial and commerce-based transactions."

While China's e-commerce companies have jumped ahead of U.S. companies in providing emerging mobile technology for merchants, many companies outside of China are adding technology that accommodates payments and other services for gig workers.

Intuit earlier this year improved its payments technology for gig workers. First Data is using its acquisition of Acculynk's PaySecure to support real-time gig economy payments, and Wirecard earlier this year collaborated with Moonrise to power faster payments to part-time and other freelance workers. And PayPal sees contractor payments as a way to offset losses from eBay's decision to shift its processing business to Adyen.

"Providing support for a more broadly defined gig economy is a possible path, with ride sharing being one example of that. Alibaba and Tencent have an insatiable need for broader functionality as their core value to consumers is in the value that they provide through their Alipay and WeChat Pay apps," Peterson said. "They are also throwing off a great deal of cash through their properties, so it makes sense that they would be moving more broadly into new categories and markets."