A Japanese bank’s investment in a ride-hailing company
On February 25, 2020, Mitsubishi UFJ Financial Group, Inc (“MUFG”), Japan’s largest bank, announced that it would invest up to $706 million in Grab Holdings Inc (“Grab”), the leading ride-hailing company in Southeast Asia. It has been reported that MUFG will acquire a ~5% stake in Grab. Also, the two companies have entered into a strategic alliance agreement, under which they will form a partnership aimed at achieving further growth in Southeast Asia, offering new services such as lending and insurance through smartphone apps.
Southeast Asia is a strategically important region for MUFG, as the bank seeks growth opportunities outside of Japan, where it faces significant headwinds via a prolonged period of negative interest rates and the low prospect of domestic economic growth. Over the past decade or so, MUFG has grown its presence in Southeast Asia through significant equity investments in local banks in Thailand, Indonesia, Vietnam, and the Philippines. Admittedly, this recently announced investment and strategic alliance with Grab will help MUFG further expand its reach in the region. The bank will be developing a strong tie with a company that owns an app downloaded on 185 million devices across 339 cities in eight Southeast Asian countries.
For MUFG, this alliance should bear a significantly larger meaning than just expansion of its geographic reach. Much like any traditional bank, MUFG is striving to transform its business model as it faces fierce competition from fintech companies looking to enter services that were previously monopolized by banks. By partnering with a company like Grab, MUFG could build expertise in offering a much wider variety of financial services, particularly around those based on data regarding individuals’ behavioral patterns.
Grab was founded in June 2012 as a ride-hailing startup operating in Malaysia and has since expanded into on-demand services such as meal delivery, QR payments, and hotel-booking, all accessible via a single app. With this strategic partnership with Grab, MUFG will gain the opportunity to learn from Grab’s expertise in consumer data collection, AI, mobile app development, etc. Furthermore, there could be potential for the two companies to partner in expanding into the Japanese market in the future.
On paper, everything seems to sound perfect. However, I feel the path forward could potentially be a bumpy one. In Japan, MUFG is perceived as one of the most established companies and has tended to attract employees drawn to the long-term stability of the organization and the traditional Japanese lifetime employment system that it operates under. Most employees are hired right out of college and groomed to be your typical banker, who, for better or for worse, is very different from the tech-savvy employee of an up-and-coming startup like Grab.
I expect the extent to which MUFG can become “digitally literate” and adapt to Grab’s incredibly fast-moving culture will be a crucial aspect to whether MUFG’s $700+ million investment would turn out to be money well-spent, or otherwise.
Disclaimer: The information used to write this post has been obtained entirely from publicly available sources. In addition, any views expressed here are of the author’s and do not represent the view of MUFG, Grab or any of its affiliates in any way.
About MUFG: MUFG is one of the world’s leading financial groups. Headquartered in Tokyo and with over 360 years of history, MUFG has a global network with over 2,700 locations in more than 50 countries. The Group has more than 180,000 workers and offers services, including commercial banking, trust banking, securities, credit cards, consumer finance, asset management, and leasing. The Group aims to “be the world’s most trusted financial group” through close collaboration among its operating companies and flexibly respond to all of the financial needs of its customers, serving society, and fostering shared and sustainable growth for a better world. MUFG’s shares trade on the Tokyo, Nagoya, and New York stock exchanges. For more information, visit https://www.mufg.jp/english.
About Grab: Grab is the leading super app in Southeast Asia, providing everyday services that matter most to consumers. Today, the Grab app has been downloaded onto over 185 million mobile devices, giving users access to over 9 million drivers, merchants, and agents. Grab offers the widest range of on-demand transport services in the region, in addition to food, package delivery, digital payments, and financial services, across 339 cities in eight Southeast Asian countries. For more information, see: http://www.grab.com.
