GRAB'S partnership with Mastercard marks a milestone in South-east Asia's cashless revolution - and the latest step in Grab's vision to become the region's leading fintech player and super app, market watchers said on Thursday.
The challenge will be in getting traction and consistent usage of the new Grab-Mastercard product, market watchers noted.
Singapore-based Grab announced on Thursday that it has tied up with global payments processor Mastercard to issue prepaid cards tailored to South-east Asian consumers. This allows them to make payment at any merchant globally - online and offline - that accepts Mastercard, through Grab's mobile wallet, GrabPay.
The Business Times understands this is the first prepaid card by Mastercard that is linked to a South-east Asian mobile wallet at scale.
The integration of Mastercard's prepaid card with GrabPay will make the latter one of the first e-wallets from South-east Asia to be accepted worldwide, said Reuben Lai, senior managing director of Grab's fintech platform, Grab Financial.
It also enables the region's 400 million unbanked and underserved consumers to buy goods and services online, an activity that was previously limited to the less than 10 per cent of South-east Asians with a credit card, Mr Lai added.
The partnership hopes to leverage Grab's 110 million South-east Asian users (based on download numbers), and Mastercard's global network of three million merchant outlets.
Rama Sridhar, Mastercard's executive vice-president of digital and emerging partnerships, and new payment flows, said that the alliance with Grab will significantly advance Mastercard's reach in South-east Asia.
"Without changing infrastructure, we can now offer merchants the opportunity to tap into Grab's user base of emerging middle-class consumers, covering one in six mobile phones in South-east Asia."
Arvind Sankaran, venture partner at Jungle Ventures, told BT that the partnership is a win-win for both parties. It helps Grab "multiply its merchant acceptance points overnight" and establish yet another step in building a "truly multi-functional app", while giving Mastercard more "digital real estate" and greater mindshare in the consumer mobile wallet space.
Mr Sankaran said: "Virtual card issuance could be a differentiator in the emerging Asian markets and attract non-credit card users to online spending."
Grab will issue both virtual and physical prepaid cards through its app. Consumers can top up their cards by handing cash to any of Grab's eight million agents, drivers and merchants on the GrabPay platform. The physical card is meant to benefit customers who are transacting in areas where connectivity is poor, or for use in transit payments, such as metro fares.
Grab and Mastercard said that they hope to offer their prepaid card in the first half of 2019, starting with Singapore and the Philippines.
Asked how this would benefit consumers in Singapore - where banked penetration is 98 per cent, the highest in South-east Asia - a Grab spokesman said that they can pay online and in-store at all Mastercard merchants without the need to own a bank-issued credit card or debit Mastercard.
The spokesman added that Singaporean travellers can use the virtual card as a prepaid travel card, which is accepted at all Mastercard merchants globally and can be topped up with different currencies without incurring transaction or exchange fees.
Markus Gnirck, director of Singapore-based fintech investment firm tryb, told BT that the Grab-Mastercard tie-up is a reflection of a core fintech movement, where "banking is increasingly done through digital services and not just banks".
Jungle Ventures' Mr Sankaran noted that a key challenge is getting traction and consistent usage of the prepaid card, given the proliferation of e-wallets in the region and the "hard-to-dislodge consumer choices when they make payments".
Other than GrabPay, other e-wallet platforms include Go-Pay, Razer Pay and Singtel Dash. However, cash remains ubiquitous and the most common way of transacting in South-east Asia, with eight in 10 transactions still taking place in cash.
To that, the Grab spokesman said: "Cashless needs to be cheaper and create more value for consumers and merchants. Working with partners like Mastercard . . . will mean a step closer to dealing with the challenges, prevalence and habits of cash."
Rakesh Krishnamuti, country manager for Singapore at PayPal, said that tech giants such as Grab can "continue to work with existing financial institutions and service providers" to provide better interoperability and integration, and be a significant part of the drive towards a more cashless South-east Asia.