It may be the most known operator of ride-hailing, food delivery and payment services with its mobile applications in the region, but Grab’s venture into retail investment three years ago in the hope of tapping its large user base has not taken flight as envisioned.

Analysts said it was not necessarily a given that consumers using Grab’s other services could be converted, especially since the ride-hailing and food delivery spaces where it dominates are unrelated to the retail investment sphere.

Some frequent users of the Grab app also told TODAY as much that there are other more established platforms that they could turn to for their investment needs.

Furthermore, Singapore is a small market, and given a low propensity for the general population to invest, it would therefore be tough for such micro-investment channels to achieve critical mass to make the business sustainable.

The analysts were giving their comments yesterday after Grab informed its customers a day earlier that it was discontinuing its two investment products — AutoInvest and Earn+ — and will not be accepting new deposits for them.

Users need to fully redeem their investments before Oct 13, or Grab will redeem them on users’ behalf at the prevailing market price and return the proceeds to their GrabPay Wallet.

The company said: “This decision follows an extensive review, which concluded that the business would not be commercially viable.”

This announcement came not long after financial advisory firm MoneyOwl announced last month that it would be winding down by the end of the year. It used to offer services such as low-cost financial planning and investment in low-cost funds.

What Grab’s investment services offer

AutoInvest was launched in 2020 and Earn+ was rolled out by Grab two years later.

AutoInvest allows users to set aside as little as S$1 for investment purposes from what they already have in their digital GrabPay Wallet.

Users who opt in to the service will automatically invest a chosen amount when they take a ride with Grab, order from GrabFood or pay using the GrabPay Card.

The money is invested in fixed-income funds managed by asset management firms, for instance, and was touted to potentially earn returns of an estimated 1.8 per cent per annum.

The returns cannot be withdrawn as cash but are channelled back into Grab’s ecosystem of partners for transactions.

Earn+ allows users to put money into their GrabPay Wallets and earn interests of up to 2.5 per cent a year.

Based on data from its latest quarterly financial results in August, Grab has 34.9 million monthly transacting users, though no breakdown by country or products were published. The company was hoping to tap its captive user base for this venture to float.

Apart from Singapore, it has operations in Cambodia, Indonesia, Malaysia, the Philippines, Thailand and Vietnam.

What was stopping the take-off?

However, some regular users of the Grab app in Singapore who spoke to TODAY said that they were not keen to take up the investment products despite being aware of their existence.

Nurul Johari, a professional in the technology field, said that she uses the Grab app for its convenience, because it provides the most options for food delivery and tends to connect her to drivers faster than other ride-hailing apps.

“This doesn’t mean I want to use Grab for other services, including investments,” the 30-year-old said, adding that she does not use any of Grab’s other products.

Esther Lim, a communications professional in her 30s, said that she uses Grab’s digital payment services occasionally, apart from its transport service.

She uses a robo-investment platform but does not use Grab’s because she feels that the firm’s venture into finance products is “experimental”.

“There are just many other options that I find more well-established and have more expertise (when it comes to investments),” she added.

Associate Professor Walter Theseira, an economist from the Singapore University of Social Sciences (SUSS), said: “I expect that the user base Grab has simply didn’t translate into placing funds with it.

“Having a consumer touch-point obviously doesn’t mean that consumers also consider you a credible investment vendor.”

Agreeing, business professor Terence Fan from Singapore Management University (SMU) said that consumers’ affinity for a couple of Grab’s products does not mean that they would be inclined to or want to use its investment services.

They would probably evaluate Grab’s investment offerings independently against other products that they can find in the market before making their decision, Assistant Professor Fan added.

Another factor hindering Grab’s attempt to enter the investment sector is that not everyone wants to be an investor.

Professor Sumit Agarwal from the National University of Singapore (NUS), whose research areas include finance and financial institutions, said: “Investment is not like taxis (or private-hire transport), where everybody wants a taxi every day.

“Very few people do investments in the world in any given country, and the fraction of people who invest is from 8 to 12 per cent.”

This low propensity may also partly explain why MoneyOwl had to wind down, the analysts added.

On its website, MoneyOwl said that its financial advisers do not earn commissions, “giving them no incentive to hard-sell or promote unsuitable or unnecessary products”.

“Financial investing is not a natural activity for many of us because we need to reduce our current expenditures or consumption to put money in for the future,” Assoc Prof Theseira said.

So without a lot of hard-selling of investment products, “many people don’t consider it”, he added.

How sustainable would it have been?

Ultimately, for the micro-investment model to be sustainable, the service provider must be able to reach critical mass, the business and economic professors said.

Asst Prof Fan of SMU said: “Even though (these businesses) say they can take small change (for investment), they also, I think, have some assumptions in terms of the number of people who would contribute, and the length of time (investors) will keep the money there.”

He added that given Singapore’s small population, it might make it more challenging for Grab to have reached the critical mass.

“How many users can you get here? Half a million? A million? If they each chip in 50 cents, you get half a million dollars.

“Is that enough to really do anything (in terms of investment)?” he asked, adding that such a model may work better with a much larger population base.

Agreeing, Assoc Prof Theseira from SUSS said: “My view is that the low-cost investing market is very much winner-takes-all due to the need for massive economies of scale.

“So there isn’t much room for a second in class, let alone third in class. But how you get to first in class, I can’t address.”

Separately, Asst Prof Fan said that “knowing its customers better” may have helped Grab.

He noted that Grab’s ride hailing services are not cheap and people who could afford using such services regularly out of their own pocket “may not be the people who can only save S$1 a day”, making reference to the minimal S$1 needed to invest in the products Grab offered.

Source: Today