Southeast Asian super-app Grab’s fintech performance stumbled in the fourth quarter.
Total payments volume (TPV), including payments from one Grab entity to another, in the fourth quarter rose 29 percent from the year-earlier period to $3.4 billion, a record, the company said Thursday in its earnings release.
But that didn’t fully translate to the topline: On an IFRS basis, financial services revenue for the fourth quarter was negative $1 million, narrowing losses from negative $4 million in the year-earlier period, Grab said.
For 2021, adjusted net revenue for financial services, including payments from one Grab entity to another, was $400 million, but excluding intra-Grab payments, adjusted net revenue was $200 million, the company reported. Adjusted net revenue includes excess incentives, or when payments to drivers or merchants exceed Grab’s revenue from the drivers or merchants.
The performance is particularly stark when compared with rival super-app Sea, which reported this week that fourth quarter revenue for its digital financial services surged 711 percent from the year-ago period. To be sure, SeaMoney hasn’t been around quite as long as Grab’s financial services, and higher growth in the early stages would be expected.
Incentive Payments Rise
Shifara Samsudeen, an analyst at LightStream Research who publishes on Smartkarma, said the segment’s fourth quarter incentives to consumers grew to around $30.7 million, compared with $22.7 million in the year-ago quarter.
«We think Grab has been paying higher incentives to attract consumers for its payment services,» she said in a note Friday.
The segment’s results were also hurt by investments ahead of Grab’s planned launch of its digital bank in Singapore, expected this year, the company said.
Stock Plunges
Higher incentives proved to be a theme for Grab’s earnings as a whole – which disappointed the market so much the stock plunged nearly 41 percent in intraday trade in the U.S. Thursday, before closing off around 37 percent.
Grab said the higher incentives in the mobility segment were aimed at bringing in more drivers as demand began to bounce back as lockdowns ended.
The super-app said its loss for the fourth quarter was $1.1 billion, wider than the $635 million loss in the year-ago period.
«Massive Disappointment»
Samsudeen called the results «a massive disappointment.»
«We did not expect Grab to spend on such huge incentives (to drivers as well as consumers) which implies that the company is struggling to grow its businesses and profitability seems like a tall order for Grab,» Samsudeen said in the note.
Competition could also weigh on Grab’s financial services growth ahead, with Samsudeen noting Grab cited the merger of Gojek and Tokopedia into GoTo as set to dampen payment volumes.
Southeast Asia’s Growth Outlook
The potential for Southeast Asia’s market growth remains positive, however.
The region still has a large unbanked population, creating gaps in the ability to collect payments – such as a dearth of credit card use — which aren’t typically seen in developed markets.
Of the around 400 million adults in Southeast Asia, around 198 million are unbanked — or don’t have a bank account — while another 98 million are underbanked, with a bank account, but without access to credit, investments and insurance, according to the e-Conomy SEA 2019 report published by Google, Temasek and Bain & Co. in October 2019, prior to the start of the Covid-19 pandemic.
In 2021, gross transaction value of digital payments in Southeast Asia grew to $707 billion, up 9 percent from $646 billion in 2020, according to the e-Conomy report for 2021, published November 2021. Consumer e-wallet usage is up 45 percent from pre-Covid levels, the 2021 report said.
In Southeast Asia, the digital wallet payment market is estimated to reach $138 billion by 2025, up from $39 billion in 2020, and compared with a 2025 estimated cash transaction value of $1.36 trillion, Grab said, citing data from Euromonitor.
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