Grab CEO Anthony Tan says the pandemic’s digital revolution is ‘permanent’

August 13, 2020, 10:19 AM UTC

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The continuous spread of COVID-19 has disrupted the way the world does business, forcing executives and consumers alike to pivot dramatically toward e-commerce. Even when the crisis recedes, the digitization it has fostered is likely to stay, says Anthony Tan, CEO and cofounder of ride-hailing firm Grab.

“There has been a permanent shift,” Tan said. “This idea of ‘complete cashless’ food arrives, my e-commerce arrives, my groceries arrive, was a novelty. But now it has become a reality.”

Grab is a Singapore-based startup that’s become a sort of “super-app,” offering various services—food delivery, digital payments, health care, and financial services—along with rides in Southeast Asia. The company currently serves more than 187 million users in over 300 cities across the region.

Backed by SoftBank, Grab raised more than $850 million in February to fund its expansion into financial services. That same month, the pandemic upended Grab’s business.

As ride-hailing trips cratered during early coronavirus lockdowns, Grab’s delivery offerings grew 20% to 30%, says Tan. During the pandemic, the company has also scaled up its delivery services—GrabFood, GrabMart, and GrabExpress, which deliver food, daily goods, and parcels, respectivelyto meet the growing demand from customers stuck at home. It has also assisted small businesses in digitizing their operations with merchant services app GrabMerchant and launched GrabProtect, a comprehensive set of safety policies for ride-hailing, to ensure the hygiene and safety of merchants and customers.

Those initiatives weren’t enough to fully offset the effects of the economic downturn. In June, Grab cut about 5% of its workforce or 360 employees. At the time, Tan said it would be the last organization-wide layoff of 2020.

Talking to Fortune’s Clay Chandler last week, Tan discussed how Grab is protecting merchants and customers and how consumer behavior and business strategy is changing in Southeast Asia during the pandemic. The conversation below has been edited for length and clarity.

Fortune: What sort of measures have you taken to promote hygiene and ensure the health and safety of team members during the pandemic? 

Anthony Tan: We were the first to introduce GrabProtect. Imagine you jump in a car, there’s hand sanitizers, there’s the plastic shield. Every time you jump on your [Grab] app, you verify that you agree to all these terms, and when [a driver] comes in and he sees that you’re not wearing a mask, he can choose to reject you as a customer even if you pay. That would be something that we would never have accepted before, but today we will prioritize safety and hygiene, even above customers. And customers actually appreciate that, and we’ve seen how that’s really helped the business. 

And not just in rides but also in food delivery. For example, we have all the contact layers, we make sure we do temperature checks for our merchants, our drivers. They have to submit temperature checks in the app constantly throughout the day.

Companies similar to yours like Uber and Lyft have faced difficulties in gaining customers’ confidence to use their services. What has been the response of Grab customers?

We have a diversified business from rides and transport mobility to food delivery, mart delivery, groceries, things like that, all the way to social e-commerce. 

Diversity is playing out because as the pandemic hit, our rides came down naturally as cities went into lockdown. But our deliveries business shot up really, really fast. We’re also seeing…that because car ownership is much lower in this part of the world than in the U.S., we see that people tend to be more willing [to travel with Grab], as long as you can give them that assurance of safety and hygiene. 

Do you suggest that one legacy of the pandemic is that people are much more habituated to the idea of shopping online and e-commerce, and that this would be a permanent shift?

That’s exactly right. Here there has been a permanent shift. For example, in food delivery, a lot of our customers are female from age 18, 20 to 35, 40. But because of the pandemic, we saw even our older segment customers, say, between age 35 and 55, embracing food delivery a lot more. 

This idea of “complete cashless”—food arrives, my e-commerce arrives, my groceries arrive—was a novelty. But now it has become a reality.

You work a lot with small businesses—this must be a very difficult time for them. Have you been surprised by how successful most of the Southeast Asian economies have been in coping with the pandemic?

It’s been tremendously difficult for some of the small businesses. Many of them who weren’t on Grab had to close. This is where I believe that GrabFood and the likes of [mobile payment solution] GrabPay, a lot of these services that were seen as, maybe at one point in the early days, nice to have…today they [are] the primary source of business for many of these guys. In many of the governments around the region, they classified us as essential service, even more important than public transport because people weren’t going to work. It was a must-have to get food into homes during lockdown.

I think when your business is threatened with survivability, the demand for [Grab] grows. Where you say, “Hey, I just have to go online, my city’s in lockdown. How do I get online as fast as possible? How do I make sure that my business is saved?”

Most Southeast Asians’ businesses, something like 90%, are small to medium enterprises, SMEs, that are a major part of the region’s business. A lot of it was traditional, meaning that they were mostly offline. So the penetration of food e-commerce and grocery e-commerce and mobile payments was still very low. Cashless [is] very low compared to the U.S. or China. I think that COVID took what was clear [about] the future and just brought it forward by years. 

This region, or at least Singapore and many other countries, can be quite disciplined. They were quite disciplined to make sure [that] “Hey, I’m [an] emerging market, I need this, and I need to embrace whatever it takes to survive.” That hunger was there. So they just quickly pivoted to online very quickly.

What is the current situation in Southeast Asia in reopening its economies, and how is Grab dealing with it?

I think it’s not going to be a one size fits all. [In] Singapore, they’re getting more and more willing to explore, more and more opening up. For example, weddings are now possible for 50 people; it started with five people at each table and now 50. Then there are markets like the Philippines that just went into…quarantine. That has gone in the opposite direction to Singapore.

I think the beauty about being a regional business, and again we are very blessed for that, is that when a market like the Philippines goes through a quarantine…[over] 90% of businesses there will come down, while in Singapore, which is opening up, business rises. I think we’re in 360 cities; the ability to have massive diversification across services and across geographies has really created that resilience for Grab.

How have you adapted your business planning for the COVID era?

One advantage we had was, because we had a lot of GrabCar and GrabBike drivers, the minute that transport came down, they were available. GrabFood saw a massive spike in volume, so we moved, like, 149,000 drivers in a period of two months from what they were used to—every day bringing people to work—to now going up stairs, picking up the food from the restaurant. Or shopping from a grocery store and then delivering that. We also saw how our GrabMart scaled to about 50 different cities in two and a half months; over 50 cities in eight countries. Now we are partners with [over] 3,000 stores in this short period, again all this literally came up during COVID.

The other thing is GrabPay [which allows for mobile wallet payments]. The idea of touching my [credit] card is now seen as nonkosher. So the idea that I can just QR code pay to many thousands of stores across the region…and because most of the people in this region—say, 70%—are underbanked in some shape or form…that to us was a great boost. You wouldn’t have thought that people wouldn’t even want to pass a credit card on. It’s so pervasive, from a customer behavior change. And merchants…actually encourage their cashier not to take [a credit card] because they don’t want a sick staff, then passing it on. So they said, “Please, I encourage you. Use your phone QR code pay, please.”

There are stores I see today [that] don’t even accept cash anymore…“That’s a new reality.

This story is part of Eastworld Spotlight, a series of conversations on matters of business, tech, and finance with executives, experts, entrepreneurs, and investors in Asia. Subscribe to Fortune’s Eastworld newsletter to get them in your inbox.