Can Xendit shrug off growing competition in digital payments?

In The Top Up this week, we look at Xendit’s growth ambitions and Grab’s latest revision to its GrabRewards program. [Read from your browser]( The Top Up 💵 Welcome to The Top Up! Delivered every Wednesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If you’re not a subscriber, get access by [registering here](. Written by Melissa Goh Fintech Journalist Hello {NAME} At this point, it’s obvious that startups are innovative while governments are largely the opposite. But during a chat with an executive in the fintech and ecommerce space last week, I was reminded of just how much influence governments ultimately have in the development of startups. For a fintech firm choosing new markets for its expansions, navigating regulatory hurdles or payments licenses are a given. But the deciding factor can be as simple as whether a digital national ID system - such as Singapore’s MyInfo - is available. Such a system would simplify know-your-customer processes to a single click. But not all governments necessarily have a digital national ID - or, at least, one as reliable as Singapore’s. In Indonesia, digital payments are taking off at an unprecedented speed. According to Bank Indonesia, the volume of transactions that took place via QRIS, Indonesia’s QR code standard, grew by [237%]( between December 2020 and December 2021. Last year, the volume of electronic money transactions also [grew by 49%](. Payment gateway firms, which help businesses to accept and process various digital payment methods, are well-positioned to benefit from this shift. But in countries like Indonesia, where the fintech potential is huge, would consumers in lower-tier cities and rural areas serve as prime targets? In this week’s Big Story, Jofie unpacks Xendit’s expansion strategy fresh off a US$300 million fundraise, where - like its competitors - it eyes the rest of Southeast Asia instead of staying only in Indonesia. Meanwhile, in this week’s hot take, I analyze Grab’s newly revised GrabRewards scheme that took effect on August 1. This is not its first revision and certainly not the last. The update restricts the earning of its loyalty points to users who transact using the GrabPay wallet or card. Will it succeed in luring customers to switch from credit or debit cards? – Melissa (Note: The Top Up will be on hiatus next week as we head off to a company offsite in Bali. See you the week after!) THE BIG STORY [New unicorn Xendit, rivals double down on regional play]( Payment gateway players in the region are looking to expand instead of focusing domestically.  THE HOT TAKE GrabRewards’ latest refresh - genius or unwise? Here’s what happened: - From August 1, Grab users in Singapore will no longer be able to earn GrabRewards, the platform’s loyalty points, for credit or debit card payments made through the app. - GrabRewards will only be given for transactions made through the GrabPay e-wallet, GrabPay card, or Grab PayLater. - This is not the first time Grab has tweaked its loyalty points system. Here’s our take: Inflation is a concept that Grab’s Singapore users should be [familiar]( [with](. Grab’s [latest update]( probably not its last, mainly impacts users who currently pay for Grab transactions through linked credit or debit cards. Presumably, the move will nudge this consumer segment to adopt or use the GrabPay card or e-wallet more frequently. The carrot is the GrabRewards points, which can be used to offset purchases in the app, online, or in stores across a range of F&B, electronics, and other retailers. GrabPay card users can also earn an additional 0.8% rebate through the [GrabPay card accelerator program](. But how effective of an incentive will the changes be? In Singapore, where there are [161 cards for every 100 residents]( consumers have no lack of card or rewards programs to shop around for. Savvy customers will pick and choose the payment platforms with the most competitive rewards. Still, Grab has little to lose. Its existing consumers are unlikely to stop using the Grab app altogether purely because of the change. Sticky credit and debit card users would continue to use their preferred payment method and simply forfeit their loyalty points. But if the strategy works, it might lower Grab’s [payment costs]( while increasing GrabPay wallets’ overall balances ahead of the launch of GXS Bank - the super app’s joint digital bank with Singtel - later this year. A Grab spokesperson tells Tech in Asia that these changes have been made to offer value to its users by simplifying the way they can earn points and enjoy new benefits. “In the past year, we’ve noticed more Grab users opting for safer and more convenient cashless payments, therefore these changes allow users to earn more points for their GrabPay Wallet transactions,” the spokesperson adds. Loyalty points [have shown]( to increase the likelihood of larger purchases by 30%, according to a 2020 McKinsey study. Done right, they could steer customers into potential growth areas. Grab’s 2018 exercise, for instance, awarded more points for then-new services like food delivery and in-store spending while devaluing points earned through ride-hailing trips. The super app did see an increase in demand for its food delivery business after implementing the change - between May 2018 and March 2019, GrabFood orders grew by [25%]( every month on average. That said, it’s hard to pin that growth down to a revision of its loyalty system alone. Singapore is not the only market where Grab has revised the terms of its loyalty program. In Malaysia, the super app [removed its tiered membership system]( as of July 1. Instead, members of [GrabUnlimited]( its paid subscription plan that offers vouchers and promotions, will earn more GrabRewards on each transaction compared to non-subscribers. While the timing of the changes are convenient, it’s likely that these revisions would have been implemented even without the upcoming launch of GXS Bank, notes Zennon Kapron, director of fintech research and consulting firm Kapronasia. In recent years, Grab has consistently revised its rewards program to lower costs while trying to maintain its bonuses. For instance, it has incentivized customers to top up their GrabPay balances via bank transfers rather than a credit card, Kapron points out. It’s also worth noting that other platforms modify their loyalty programs all the time. Airlines, for instance, [devalue frequent flyer miles]( from time to time to keep ahead of [rising costs](. It’s too early to know if Grab’s strategy will work. But as the super app increasingly contends with other payment methods that may roll out more competitive rewards, it will effectively be after a “shrinking [payments] pie,” Kapron says. – Melissa NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Indonesia bans PayPal, Yahoo Search, and other tech platforms]( As PayPal did not register as an electronic-system operator per a 2020 regulation, users must transfer their funds to other platforms by August 5. 2️⃣ [GoTyme Bank gets go signal to set up Philippine digital bank]( The bank, a joint venture between Singapore-headquartered digital banking firm Tyme and Philippine conglomerate Gokongwei Group, is one of the six entities granted digital banking licenses by the Philippines. 3️⃣ [Indian fintech startup nets $50m in first close of series B]( Jai Kisan, which helps rural SMEs digitalize their transactions and secure credit, has over 100,000 businesses on its app. 4️⃣ [Jack Ma may let go of Ant Group control]( The tycoon, who controls 50.52% of the company’s shares, may transfer some of his voting powers to Ant Group executives. 5️⃣ [Chope serves $720k in funding to F&B digital payments firm]( Through the investment in Getz Group, Chope aims to enable orders and payments at restaurants across Singapore directly through its app. That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preference center. In the meantime, if you have any feedback or ideas, feel free to get in touch with Terence, our editor-in-chief, at terence@techinasia.com. See you next week! P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](  Copyright © 2022 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894