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Why Grab does not have a handle on Indonesia

November 9, 2018
in Asia News, Economy, Featured, Indonesia, Southeast Asia, Transportation
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Home Asia News
Post Views: 162

 

A ride-hailing rivalry is gearing up in Southeast Asia. With a fresh US$2 billion (RM8.36 billion) war chest, Singapore-based GrabTaxi Holdings Pte is doubling down on its expansion into Indonesia.

Meanwhile, PT Go-Jek Indonesia Tbk is tiptoeing into its main competitor’s home turf, and making a foray into Vietnam’s buzzing cities.

Jockeying for success probably comes naturally to the companies’ founders, who were once friends and classmates at Harvard Business School. Both recognised the opportunity and wagered on scale in a region where demographics work in their favour.

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The success of that strategy depends on a bet that all millennials are alike: that in the age of Facebook and Instagram, the online habits of a 22-year-old Vietnamese would not be too different from an Indonesian’s.

In Asia, startups have also tapped into the rise of the super-app, a one-stop shop for all of your personal needs. Tencent Holdings Ltd’s WeChat is a good example. (The trend is distinct from the US, where specialised apps dominate: Amazon.com for shopping, iMessage for chatting and Uber for transportation.)

On this measure, Go-Jek has gotten it right. Besides booking a ride, you can pay bills, order food, send express packages and find house cleaners without leaving the Go-Jek app. You can even hire a hairdresser, using Go-Glam.

Grab, by comparison, offers only food and express-package delivery beyond its ride-hailing options.

Even if Grab wanted to develop into a super-app, it could not in Indonesia. Unlike Go-Jek, the Singapore company does not have a coveted e-money licence issued by the central bank.

Such a permit enables Go-Jek to service consumers who do not have a bank account or credit card. With Go-Pay, users can top up at convenience stores, or simply hand cash to one of the company’s one million drivers. The money instantaneously shows up in an e-wallet account.

Having suspended Grab’s e-wallet late last year, Bank Indonesia in May followed up with new regulations designed to curb outside influence. So if you’re a start-up with more than 49% foreign ownership, forget it. Grab now partners with OVO, Indonesian conglomerate Lippo Group’s e-wallet, meaning it must cede some control over user experience and technology.

In Indonesia, offering an e-wallet is vital because banks are so behind on technology. From my conversations with start-ups in Jakarta last week, an online transfer’s drop rate could be as high as 70%.

On Shopee, an e-commerce site owned by Sea Ltd, over 20% of the goods ordered are abandoned at the payment stage because bank interfaces are so clunky.

Go-Jek is clearly flaunting its e-wallet licence. An express-delivery package from Bloomberg’s Jakarta office to the central bank — a 1.6km — cost 13,000 rupiah (RM3.17) during morning rush hour, but “only 12,000 rupiah with Go-Pay!” according to an ad on its app.

One can’t help but wonder what will happen to Go-Jek’s licence if foreign funding keeps flowing in. It’s reportedly close to raising another US$1.5 billion from the likes of Google, JD.com Inc and Tencent, following a US$1.5 billion cash infusion led by the latter in February.

Bear in mind Go-Jek is now Indonesia’s largest private-sector employer and helps provide a solution to a voter-sensitive issue: Jakarta’s notorious traffic jams. Does Bank Indonesia really want to upset the apple cart?

Speaking at a private-equity investors’ forum in Ho Chi Minh City in May, Rohan Monga, Go-Jek’s chief operating officer, went to great pains to emphasise that its Vietnam venture, known as Go-Viet, is operated by locals. It knows only too well the importance of perception.

Source :
theedgemarkets.com
Tags: Go-jek IndonesiaGrabTaxiOvostartups
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