Grab Indonesia has arrived in Jayapura, Papua, as part of the online ride-hailing service's expansion strategy to offer a safe, convenient and affordable transportation alternative in the archipelago. (Reuters Photo/Edgar Su)
Green and White Revolution
BY :SHOEB KAGDA
MARCH 14, 2017
Jakarta. A revolution is underway in Southeast Asian cities besieged with traffic congestion, poor payment systems and low road-safety standards. Since it burst on the roads in 2012, app-based ride-hailing provider Grab has redefined transportation in the region. In the process, it has become Southeast Asia's hottest tech start-up.
They appear to be everywhere at once. The ubiquitous green and black jackets and helmets stand out in traffic, on corners or in supermarkets helping customers get around Jakarta's busy streets.
Over the past three decades, information and communications technology (ICT) has revolutionized the way we work, the way we shop and travel and the way we interact with each other. The way we move around has not changed much but now, with smartphones, app-based transportation services are redefining transportation and a host of other industries in cities across the world.
In Jakarta and in dozens of other cities across Southeast Asia, the green and white logos of Grab are distinct and highly visible. Founded in 2012, Grab has emerged as Southeast Asia's leading ride-hailing platform with over 630,000 drivers. It is now seeking to expand aggressively across the region and across industries.
According to a World Bank report, almost 200 million people moved from rural to urban areas in East Asia between 2000 and 2010, a figure equal to the world's sixth largest country. East Asia’s urban areas include eight megacities with populations of over 10 million; 123 large cities of between 1 million and 10 million people; and 738 medium and small cities with 100,000 to 1 million people.
This is the market that Grab is targeting by offering a technological solution for transportation challenges to the region's urban class. This has brought Grab and other ride-hailing companies in direct competition with incumbent taxi companies with the stakes being high. The disruption underway will upend the industry but ultimately ride hailing companies will prevail because they are more beneficial for the ecosystem.
This is primarily due to two factors: drivers with ride hailing companies make more money as they get to keep 80% of the fare. If they were to drive with incumbent taxi companies they only get to take home 20% of the fare.
Secondly, customers also benefit from lower charges as the service is cheaper and seamless. Given these factors, it is critical that policy makers embrace this change and evolve along with the market.
Tech-based online transport services have one more advantage. They empower the drivers and turn them into entrepreneurs, which is consistent with the concept of the people's economy. The harder they work, the more they earn and they can now own assets instead of only being a factor of production. This is why Grab is growing rapidly and attracting both drivers and consumers at unprecedented rates.
"We are not a taxi company. We are a tech company," Bayu Seto, Grab’s Indonesia country head for business development tells GlobeAsia. "This platform can help passengers get a ride and drivers get passengers."
In 2016, the company launched an ambitious rebranding exercise by bringing all its different companies under one umbrella symbolized by a fresh new logo. "Look at these roads, they symbolize Grab – these roads took us from GrabTaxi, GrabCar, GrabBike, GrabExpress and GrabHitch," co-founder and CEO Anthony Tan noted in an interview with Digital New Asia last year at the unveiling of the new logo.
"The possibilities are endless – wherever these roads take us, we know there is one common destination, and that one common destination is the promise that we will serve our customers by solving local problems."
Understanding the market
While it is a regional company, Grab is very conscious of serving the needs of local customers. Having experienced exponential growth – its revenue grew by 600% in 2016 – it is aware that having local knowledge is key to maintaining such growth.
"As a tech start-up we know that things can change very quickly," notes Ridzki Kramadibrata, Indonesia managing director for Grab. "Even a five-year horizon is too long in this industry so we are striving for people to use us more in their daily lives and at the same time we are striving to understand our customers better."
Ridzki is not new to the transportation industry nor to start-ups as he worked with AirAsia before joining Grab. "We are very focused on technology and transportation and we truly believe that people should have more options in their transportation modes and technology should be the enabler."
He added that the current trend is pointing to customers preferring multi-mode transportation services on one platform. By providing the complete package, Grab has secured more than 30 million users across the region, making it the largest tech-based transportation player in the region.
Grab currently has operations in 35 cities across Southeast Asia including Singapore, Malaysia, Thailand, the Philippines, Vietnam and Indonesia. Its exponential growth rate has attracted some bluechip investors such as Japanese telecommunication giant Softbank, Singapore government investment arm Temasek, Indonesia's Lippo Group and China's DB Chuxing.
In September 2016, Grab raised $750 million in equity financing, bringing its total cash pile to over $1 billion and valuing the company at $3 billion.
Jewel in the crown
With a population of around 255 million and one of the world's fastest-growing economies, Indonesia is a key market for Grab and its competitors, who include America's Uber and local outfit Go-Jek.
The funds raised last year will be used to expand Grab's presence in Indonesia, says Ridzki. "I do not know if we can continue to grow exponentially but I do not see our growth slowing down. Our focus at the moment is to expand across Indonesia."
Grab currently operates in eight cities in Indonesia but with growing urbanization in the country, the number of urban centers is growing rapidly, thus creating a huge market for companies such as Grab. According to Ridzki, Grab is experiencing exponential growth in all the cities where it currently operates.
According to recent reports, Indonesia's ride-hailing services market is valued at $15 billion, the largest in Southeast Asia and among the largest in Asia. To cement its position in Indonesia, Grab plans to expand into mobile payment services.
According to media reports, Grab is in the process of acquiring Indonesia-based online payment startup Kudo for an estimated $100 million, its first major acquisition.
While he could not confirm the acquisition, Ridzki did note that Grab is looking to invest in Indonesia. In its 2020 vision, Grab intends to build an innovation center in Indonesia, invest in tech start-ups and social technopreneurs and boost financial inclusion given that only 35% of the population is bankable.
"We see great potential in Indonesia so the need to understand the local market is high," he notes. "We want to be hyper-local and build local talent that can work closely with our world-class engineers and IT professionals."
Working closely with Nobu Bank, a Lippo-owned bank, Grab is rolling out a cashless payment system, GrabPay, where users can have seamless service when booking a GrabCar, GrabTaxi or GrabBike. Payments are a central part of Grab's strategy in Indonesia as it goes head-to-head with Uber and Go-Jek.
In May 2016 Grab launched GrabFood in Jakarta, an app-based service that allows customers to order meals and have them delivered to their homes and offices. In March last year, it started a partnership with MatahariMall.com, which is owned by the Lippo Group, to offer online and offline services using the e-commerce platform.
As it continues to grow rapidly in Indonesia and other Southeast Asian markets, Grab is highly cognizant of the challenges it faces in terms of contributing to the overall social good. In almost all the markets it operates in, with the exception of Singapore, the company understands that it faces both social as well as business hurdles.
The challenges include acute traffic congestion; low safety levels on toll roads; large populations with low-income levels; and overlapping regulations.
"Our challenges are also opportunities," says Ridzki. "For example people in Jakarta and other major cities are looking for solutions to avoid traffic. By tapping into technology, we can develop algorithms for people to tap into the most efficient transport service."
Grab also monitors speed limits for all its drivers on major toll roads to ensure that they do not drive too fast or too slow. Drivers are put though rigorous training in defensive driving techniques before being accepted while the company provides new income opportunities for people from all levels of society.
Grab and other ride-hailing services have disrupted existing transportation providers by marrying technology, social trends and cheaper services. Consumers are the ultimate beneficiaries as they now have greater choice in terms of choosing their transportation options.
But as Ridzki notes, for Grab to have real social impact, its services must be integrated with other public transportation systems. "All transportation systems must be connected and we are actively discussing such issues with other transportation companies."
In Singapore and Manila, Grab has shared its data with local governments to help them solve traffic problems. It is now using its technology to help Jakarta and other Indonesian cities make moving around easier, stress free and enjoyable.
This story was published in Globe Asia magazine on March 2017