GoTo vs. Grab: How different are their fintech strategies?

In The Top Up this week, we dive into the fintech businesses of GoTo and Grab and look at key players like Airwallex in the B2B payments space. [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: - [Whether Grab and GoTo’s fintech strategies are diverging]( - Airwallex and other fintech players targeting the fast-growing B2B payments sector - [A rare fintech firm that checks the growth, scale, and profitability boxes]( --------------------------------------------------------------- Hello {NAME} The rivalry between Coca-Cola and PepsiCo is one of the most well-known in the corporate world, even as their businesses have diverged over time. While Coca-Cola has remained a beverage company (albeit with over 200 brands worldwide), PepsiCo’s beverage business accounted for only [42%]( of its 2022 revenue - with the rest coming from food. Grab and Gojek’s rivalry is less storied, but both companies’ paths are also starting to diverge. Ride-hailing and food delivery remain the bedrock of their businesses. However, Gojek’s 2021 merger with Tokopedia means that GoTo Group has more exposure to ecommerce compared to its Singapore-based competitor. Financial services is an area that both GoTo and Grab are focused on, with the two firms running digital banks on top of what they offer on their respective apps. However, as my colleague Samreen notes in this week’s big story, they have different approaches to their fintech strategies. For example, while Grab prioritizes “on-platform” transactions, GoTo continues to promote payments outside of its ecosystem. GoTo also appears to be taking a more aggressive approach to launching new products, even as Grab has shut less viable ones like GrabInvest. Yet, one should not overstate their differences. At the core of GoTo and Grab’s fintech strategies is a focus on lending. They are also both targeting underserved and unserved consumers. This focus on the underserved segment carries through to the B2B payments space, where players such as Airwallex and Sunrate have managed to build fast-growing businesses by focusing on neglected SMEs. I take a closer look at this sector in this week’s Hot Take. -- Simon  --------------------------------------------------------------- THE BIG STORY [Are Grab’s and GoTo’s fintech strategies diverging?]( While Grab is engaging customers within its ecosystem, GoTo has been onboarding users both inside and outside its platform. --------------------------------------------------------------- THE HOT TAKE Is Airwallex’s strong growth a sign of the B2B payments goldmine? Here’s what happened: - Airwallex announced last week that revenue for its Singapore business grew 13x year on year in the first half of 2023. - Founded in Melbourne with global operations, the fintech firm has just made Singapore its global headquarters. - Its acquisition of Mexico-based payments platform MexPago in October is part of its plans to expand into Latin America. Here’s our take: While Airwallex only entered the Singapore market in [2022]( the city-state is shaping up to be an important hub for the payments company. Apart from serving as the firm’s global headquarters, Singapore is one of its fastest-growing markets. According to Alternatives.pe (previously VentureCap Insights), Airwallex Singapore made US$5.4 million in revenue last year. Assuming its 13x growth rate carries over to the second half of 2023, revenue for the full year from its Singapore business alone will be around US$7o million. Airwallex [operates]( across 20 offices in Asia, Australia, Europe, and the US. In Southeast Asia, it currently has a presence in Singapore and Malaysia, but it intends to use the former as a springboard to expand across the region. Recently, the company also entered Latin America through its [acquisition]( of MexPago, a payment service provider based in Mexico. Importantly, MexPago holds an Institution of Electronic Payment Funds license, which [allows]( it to process electronic payments through digital platforms. Airwallex is but one example of the B2B model’s potential in financial services. YouBiz, a B2B product of multicurrency digital payments platform YouTrip, offers SMEs and startups a corporate card and spend management tools. It already serves [more than 3,000 businesses]( despite only being launched in 2022. At the time of its US$50 million series B fundraise in October this year, YouTrip co-founder and CEO Caecilia Chu said that the company sees “vast opportunities” in the B2B payments sector as businesses become increasingly global and require cross-border financial solutions. Meanwhile, we recently reported that Singapore-based Sunrate, which enables companies to make cross-border payments to other businesses, has hit [US$100 million in annualized revenue]( based on its figures for August. For each of the last three years, the firm’s revenue has grown by over 80% year on year. What’s driving growth in the industry? In a global survey of 1,000 SMEs in the US, UK, China, Australia, and Singapore commissioned by Airwallex earlier this year, [82%]( of them said that they feel overlooked by banks and would be open to alternative providers of services such as cross-border payments, foreign exchange, and treasury. However, the sizable opportunity of the B2B payments sector means that competition will be fierce. The relatively commoditized nature of these services also calls into question how profitable these businesses can be in the long run. Airwallex’s Singapore business, for example, suffered an [operating loss of US$5.9 million in 2022]( widening from US$4.3 million the year before. Sunrate, though, says it has been net profitable since 2021. Given the nature of the B2B payments business, the industry will benefit from scale and is likely to consolidate around a few large, global players. Going forward, expect more acquisitions in the vein of Airwallex’s MexPago deal.  --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Indonesia to reduce fintech lending interest rates next year, OJK says]( From January 2024, fintech firms in the country can only charge 0.1% and 0.3% per day on productive and consumptive loans, respectively, to combat high interest rates. 2️⃣ [Ex-Blackstone exec’s fintech firm bags $10m in NEA-led seed round]( Founded in early 2023, Singapore-based LXA aims to streamline the mortgage lifecycle. 3️⃣ [BondbloX raises $6m to expand bond trading platform]( The Singapore-based firm will use the funds to expand its reach to India’s Gujarat International Finance Tec-City. 4️⃣ [Singapore BNPL players to follow new code of conduct by March 2024]( The six buy now, pay later companies operating under the code - which aims to promote responsible lending practices - are Ablr, Atome, Grab, LatitudePay, SeaMoney, and ShopBack.  --------------------------------------------------------------- FYI [How Sunrate reached $100m in annualized revenue while staying profitable]( The Singapore-headquartered company has been net profitable since 2021.  --------------------------------------------------------------- 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