‘Save now, pay later’ gains traction in India’s Tier 2 cities

In The Top Up this week, we look at the digital investment platforms popular among young Indians and GrabInvest’s sudden closure. [Read from your browser]( The Top Up 💵 Welcome to The Top Up! Delivered every fortnight 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](. IN FOCUS In today's newsletter, we look at: - Young adults driving the [rise of wealthtech startups]( in India’s Tier 2 cities - Why the closure of GrabInvest signals more challenges ahead for digital investment platforms - Indonesian payments firm LinkAja hitting its [EBITDA-positive]( milestone --------------------------------------------------------------- Hello {NAME} Buy now, pay later is no longer in vogue - but perhaps “save now, pay later” is. Professionals in India’s Tier 2 cities are taking unconventional approaches to obtain their latest kicks - setting aside small sums of money in investment accounts, earning interest over months, then making a purchase with the help of discounts or vouchers from brands. Many digital investing platforms have turned profitable by focusing on serving customers in the country's Tier 1 cities. But a growing movement, led by companies like Multipl and Wint Wealth, are targeting users in Tier 2 areas and beyond. These firms face challenges such as competition from incumbents, declining household savings, and a lack of financial literacy. Prabhu Mallikarjunan gives the lowdown in this week’s Big Story. I have a lot of respect for the firms hunkering down on widening financial inclusion. But, as Grab’s closure of investment services AutoInvest and Earn+ last month signals, doing so in a commercially viable way isn’t always easy. I dive into that and more in this week’s Hot Take. -- Melissa  --------------------------------------------------------------- THE BIG STORY [India’s tier-2 investment tech startups gain steam, but challenges persist]( Since 2020, nearly 126 investment tech startups have emerged in India, with a quarter focusing on gold investments.  --------------------------------------------------------------- THE HOT TAKE Does GrabInvest’s closure signal the end of affordable investing? Here’s what happened: - Last week, Grab [discontinued]( its GrabInvest services in Singapore, saying the business was not “commercially viable.” - Both AutoInvest, which lets users invest a small amount of money each time they use Grab’s services, and Earn+, through which users earn interest on money sitting in their GrabPay e-wallets, stopped accepting new deposits from September 25. - While the concept of auto-investing in bite-sized amounts was laudable in theory, poor execution - and economics - were ultimately its undoing. Here’s our take: The signs were not looking good for GrabInvest even just six months following its launch in 2020. Personal finance junkies piled onto the new service that promised returns of as much as 1.18% per annum - 1.8% at the time of launch - only to leave scathing reviews that warned users of their [dismal earnings](. “Just put your money elsewhere,” said [one such user]( who made a loss with AutoInvest, which focuses on short-term fixed income and money market funds. AutoInvest was built on the idea of microinvesting: everyday people could invest by automatically setting aside S$1, S$2, or S$5 (US$0.70, US$1.45, or US$3.65) each time they make a transaction on Grab. Its low entry point made it accessible to beginners. Unfortunately, low returns and high fees meant savvier investors likely flocked to other platforms. StashAway and Syfe, for instance, both offer guaranteed annual returns of [3.6%]( and [3.7%]( respectively, on their cash management solutions, with no fees or minimum sums. With the backing of the Grab ecosystem, AutoInvest should have had to spend less to acquire and retain new customers. The focus on bite-sized investing, however, made it unlikely that the service drew enough funds to sustain its operations. For example, a person who transacts via GrabPay three times a week and chose the S$1 option would have invested only S$156 (US$114) a year. In contrast, savings programs offered by incumbents like [DBS’ Invest-Saver]( or [Singlife’s Navigator]( require investors to commit a minimum of S$100 or S$200 (US$73 or US$146) a month, respectively. Meanwhile, Earn+’s nonguaranteed returns of [2% to 2.5% per annum]( could not match what competing robo-advisor platforms were offering. GrabInvest isn’t the first digital investment platform to fall - and likely won’t be the last. In August, MoneyOwl, a platform praised for its affordability, [shuttered](. The firm cited the “high costs” of acquiring clients and tech development, which made it challenging to achieve commercial viability. Investing should be affordable, convenient, automated, and effortless. But no one said getting there - and doing so profitably - would be easy. – Melissa Currency converted from Singapore dollar to US dollar: US$1=S$1.37.  --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Legacy payments firm taps SG politician amid comeback bid]( Tin Pei Ling, a member of parliament in Singapore, has joined DCS as its managing director for strategic partnerships and business development, following a seven-month stint at Grab. 2️⃣ [MADCash secures new funding to support women-led microbusinesses]( The Malaysia-based startup plans to use the funds to integrate AI into its platform. 3️⃣ [Spenmo lays off staff in bid to become profitable]( Layoffs at the Singapore-based firm, which allows companies to track their expenses, are estimated to impact 25% of staff. 4️⃣ [2C2P records $15m loss in 2022 as it invests in employees]( Losses at the Ant Group-backed company came after three profitable years and despite a 10.3% year-on-year increase in revenue to US$124.5 million. 5️⃣ [Bank Mandiri partners with FishLog to expand MSME financing in Indonesia]( Through the collaboration with the Indonesia-based aquaculture startup, the bank aims to disburse around US$3.2 million in credit to MSMEs, particularly in the fisheries sector.  ---------------------------------------------------------------  FYI [LinkAja reaches profitability despite fall in new users as new strategies take off]( The Indonesian fintech firm is taking advantage of its affiliation with state-owned companies to rise in the B2B space.  --------------------------------------------------------------- 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 preferences 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 in a fortnight! 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 © 2023 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894