Taken at face value, Grab’s acquisition of Bento Invest last month made plenty of sense. By bringing the robo-advisor into the fold, the super app could further its ambition of padding out its financial services offering – not only to bring affordable wealth management products to it users, but also to support its bid for a digital banking license in Singapore.
But the deal also came with a number of unanswered questions: Why did Grab opt for Singapore-based Bento, a relatively unknown player, in a world seemingly awash with higher profile robo-advisory startups with their own user bases and better brand recognition?
‘Most suitable partner’
Grab didn’t disclose financial details of the acquisition. A filing with Singapore’s Accounting and Corporate Regulatory Authority indicates that Bento – now known as GrabInvest – and its holding company have combined paid-up share capital of S$6 million (US$4.31 million).
Bento co-founder and former CEO Chandrima Das has joined Grab as its head of wealth management and is responsible for GrabInvest. She will be reporting to Philip Chew, head of investment and new businesses within Grab Financial Group, which is headed by senior managing director Reuben Lai. The robo-advisor’s 11 other employees have made the move to Grab as well.
Lai tells Tech in Asia that Grab saw Bento as the “most suitable partner” in the robo-advisor space due to its proprietary tech and experience in digital wealth and asset management.
This inconspicuousness is perhaps explained by the fact that it has mainly sold white-label solutions to financial services providers, while its smaller business-to-consumer operations have focused on managing assets for high-net-worth individuals, charities, and endowments.
“Bento’s clients represent some of the largest financial institutions in the region, and we are excited to welcome them to the Grab family,” Lai says, without naming any of those clients.
Such an “out-of-the-box” solution may have proven more attractive to Grab from the perspective of getting a wealth management service to market as quickly as possible. It may also have come at a more attractive price point than some of the better-known robo brands out there.
The fact that millions of… payments are already going through the platform gives Grab a significant edge in attracting funds.
Ultimately, Grab may have seen the acquisition mainly as a means to acquire the necessary regulatory clearance, as quickly and affordably as possible.
To sell wealth management products to retail consumers, Grab needed to attain a capital markets service license under the Retail Licensed Fund Management Company (retail LFMC) category from the Monetary Authority of Singapore (MAS).
Such rules require retail LFMCs to have a minimum base capital of S$500,000 (US$359,000), as well as “financial resources which are in excess of its total risk requirements,” a minimum of three full-time Singapore-based employees with at least five years’ experience, and a CEO with at least 10 years’ experience.
Lai says that Grab “received the license with the acquisition of Bento,” indicating that the onboarding of the Bento team is what enabled GrabInvest to meet these MAS requirements.
GrabInvest is set to go live on the Grab app in the first half of 2020 in Singapore, with expansion in other markets to follow.
Although Grab has done significant work in building out its Grab Financial portfolio, wealth management has remained a product gap, says Zennon Kapron, director of fintech advisory firm Kapronasia.
Yu’ebao – the money market fund that China’s Alipay made available to its users in 2013 and which was, until this year, the world’s largest such fund – gives an indication of Grab’s future plans. Similar mobile-first, easy-to-access, and low-risk investment options could likewise prove a big success in Southeast Asia, Kapron tells Tech in Asia.
Grab is likely to “capture more consumer wallet share,” he says. “The wealth management offering, on its own, might not be enough to bring new users to the Grab platform, but it should help to better monetize those that are already on there.”
In Singapore, consumers already have a variety of wealth management options to choose from. In addition to consumer-facing robo-advisory startups, legacy banks have also been busy adding automated investment features – such as DBS’s DigiPortfolio and OCBC’s RoboInvest.
Lai isn’t able to disclose what GrabInvest will cost to consumers at this stage. “What we can say is that in Singapore, we will not be charging some fees which the mass retail market typically has to pay – such as entry and exit loads, performance fees, and so on,” he says.
Another backdrop to the Bento deal is Grab’s pending application for a digital bank license under Singapore’s nascent virtual banking system.
To be successful, applicants will have to demonstrate that they can build a viable, profitable business over the long term. That’s going to be a tough ask for Grab – which has yet to turn a profit overall – to do on its own.
In Singapore’s mature banking marketplace, basic deposit and checking services won’t cut it. Given this, products – such as insurance and investment – that digibanks can tack on to their core offerings are likely to be key to sustainability. That means more M&As are on the horizon, says Frank Troise, Asia-Pacific CEO at fintech consultancy SenaHill Partners.
“All of the digibank applicants need a wealth proposition ASAP,” Troise tells Tech in Asia. “It’s the only clear offering that gets them to accomplish the profitability requirement of the MAS. Grab and Singtel are now first, and we expect the other digibank applicants to do the same very shortly.”
The ace up Grab’s sleeve is its massive user base, with its app installed on millions of mobile devices across Southeast Asia. Partnering with Singtel – the biggest phone carrier in Singapore which has associates in Indonesia, Thailand, and the Philippines – is only likely to compound that user-base advantage.
“The fact that millions of individuals are using the platform every month and that payments are already going through the platform gives [GrabInvest] a significant edge in attracting funds,” Kapron says.
Currency converted from Singapore dollars. Rate: US$1 = S$1.39