Kudo(s) to Grab – good acquisition, but failed integration?

Last year, Grab’s acquisition of Kudo was hailed as a strategic coup against Gojek – since it opened doors for Grab to tap into Kudo’s network of a few hundred thousand agents.

The main impediment for any wallet in Indonesia to succeed – is the fact that most Indonesians prefer to spend cash. What put Gojek ahead (and still ahead) is their network of drivers, who also function as mobile top-up agents. This put them in a coveted position when it comes to mass adoption and usage.

Helping people to make money – it’s not by choice

Prior to acquisition by Grab – Kudo, as a company, did well for itself. It tried to maximise the potential income for its agents (through different earning channels, including ecommerce), which worked well to aide its growth and success. What’s surprising is that 1 year post-acquisition, Grab still failed capitalize on Kudo’s expertise, to benefit its drivers. Instead, there are claims of it gouging its drivers, after acquiring Uber in Southeast Asia.

We have written extensively about Grab and even GrabPay, and it should not come as a surprise that we currently view Grab as a marketplace for gigs (since they have pivoted into parcel delivery, food delivery and many more). As it goes, marketplaces only exist when service providers (or sellers) actually make money – and this law applies even for Grab.

While Grab has been largely successful in Southeast Asia without much effort and innovation (as passengers and drivers have no other options), in Indonesia, they are clearly lagging behind Gojek (could be due to lack of earning power amongst others). We think the tide can easily turn in Gojek’s favour as it enters Grab’s territory – if Grab does not assure that their drivers can continue to earn stable and dependable income.

After all, many drivers for ride-hailing apps work “full-time”, and their earning power is always a concern. Who wouldn’t want to make more?

Slowly realizing, but is it too late?

As the saying goes, it is usually lonely at the top. Grab, being the dominant player in Southeast Asia holds the coveted position (at least for now). However, now that driver incentives have been lowered or reduced completely, instead of worrying that their drivers will switch to the competitor’s app, they have to worry about the drivers not making enough – and quitting Grab altogether.

Perhaps realizing this (and unfortunately only now), Grab launched in-car shopping experience for passengers which they dubbed “Grab & Go”. Will it be enough to convince drivers that there’s enough money to be made, driving for Grab?

On top of that, it doesnt help that Kudo’s key person also leaves to join another company. Not only did Grab fail to adopt Kudo’s technological and operational advantage, but it failed to keep key talent in the company. This is indeed worrying.

Conclusion

Carousell launching Caroupay is perhaps an even more disturbing news (for Grab). Backed by DBS, it could take the market by storm. While we don’t see Caroupay as a threat to GrabPay now, it is undeniable that payment apps must be absolutely used everywhere.

If GrabPay is to become the ubiquitous payment app anywhere in Southeast Asia – it has definitely got to admit that has a lot to catch up to. Of course, in the process, it has to provide value to its users through its ecosystem. Funnily, the game has changed and Grab needs its drivers and customers even more than ever – if it is to succeed in payments.