Truly mobile money – ride-sharing and mobile payments in South and Southeast Asia
by Dan Waldron and Camilo Tellez, November 29, 2018
Transportation Series: Blog 4
This is blog 4 in this series that examines three key aspects of the transportation sector: Tolling, urban transit, and ride-sharing with a focus on emerging economies. We review key impediments to the flow of goods and people, and dive deep into extraordinary examples of innovation that have leveraged digital payments to overcome barriers, reduce costs and increase productivity. Read the introductory blog, blog 2 on tolling, and blog 3 on urban transit.
The hidden benefit of ride-hailing apps: increased adoption of digital payments
Ride hailing, the act of digitally booking a ride with a car or motorcycle, is no longer a modern convenience for the elite only. Eight years after Uber helped the service go mainstream on smartphones, ride hailing is a $46 billion global industry—and could grow to six times that size by 2030. These applications now provide affordable transportation to millions and becoming an irreplaceable link in urban transit networks.
Much of the industry’s growth is in South and Southeast Asia, where a boom in urban migration is putting unprecedented stress on city infrastructure and services. As officials in developing markets struggle to meet the needs of their growing populations, ride-hailing is emerging as a promising solution with a ripple effect beyond better transportation.
In Jakarta, a city of 10 million people with at least as many private vehicles on the streets, traffic restrictions have become so severe that drivers routinely hire ‘jockeys’ to sit in their cars in order to meet minimum passenger requirements. Ride-hailing companies such as Go-Jek offer a promising alternative. Motorcycles (known as ‘ojeks’ in Indonesia) have long been a presence in the city but were unreliable and required price haggling. Since 2015, Go-Jek has allowed residents to hail a motorcycle for an agreed-upon fare from their mobile phone, helping them avoid traffic and arrive on time. Go-Jek now has over 1 million drivers in Indonesia, and are expanding into other markets.
Grab drivers are spread across 200 cities and 8 Southeast Asian countries
Similarly, Grab, which began in Malaysia in 2012, has established a presence in 200 cities across 8 Southeast Asian countries, with 2.4 million drivers. In China and India, local firms Didi Chuxing and Ola operate in hundreds of cities with millions of drivers, using a mix of cars and motorcycles.
While ride hailing is undeniably transforming the way people commute, the service also provides an often overlooked gateway to greater financial inclusion through increased adoption of digital payments. Companies are combining intuitive mobile payments with an increasing array of services, becoming full-service, digital ecosystems and creating economic opportunities for millions of people.
In markets where credit and debit card ownership is low, many ride-hailing companies have developed their own digital payments channels, linking a mobile wallet to their ride-hailing application. Payments services are run as separate companies, and the app-linked wallets can be topped up at banks, retail stores, ATMs, and even by giving cash to drivers, giving new meaning to the term “mobile money.” From one digital platform, a company is then able to offer many other services: Go-Jek’s GP-PAY allows customers to book massages, pay electric bills, and order food delivery; Ola’s Ola Money can be used to pay for hotel rooms, pizza, and goods on eBay; and Grab’s GrabPay is partnering with financial service providers to offer microloans to users. In China, Didi Chuxing has acquired a third-party payment license.
To be sure, ride-hailing services are not without their flaws. They have come under fire in recent years for regulatory clashes, labor disputes, and increased emissions. However, overcoming these challenges is worth the effort for companies and local officials alike, as the underlying technology can provide virtually endless social and economic benefits for cities and citizens.
Today’s efficient, sustainable and inclusive cities are those that embrace the evolving use cases of new technologies. In China, social network WeChat and e-commerce platform AliPay drove the uptake of mobile payment platforms and then rapidly integrated other services to become indispensable parts of the retail and service economy. Similarly, transportation—particularly ride hailing services—is an integral part of our daily commutes and has the potential to help in many other ways. Soon, that ride-hailing app on your phone will be more than a way to get around—it could be the gateway to greater economic opportunity through digital payments.
READ THE TRANSPORTATION SERIES
About the Author
Dan Waldron and Camilo Tellez
Digital Payments Consultant, Better Than Cash Alliance
Daniel Waldron is a Digital Payments Consultant with the Better Than Cash Alliance.
Head of Research and Innovation, Better Than Cash Alliance
Camilo Tellez-Merchan is the Head of Research and Innovation for the Better than Cash Alliance.