Grab and GoTo, two of South-East Asia’s leading superapps, are encountering difficulties as they navigate slower growth and a shift towards profitability. These companies, which sought to replicate the success of China’s WeChat, have been offering a range of services from ride-hailing to food delivery under one app, attracting global investors who bet on the region’s tech-savvy consumers and the surge in demand for digital services during the pandemic.

However, rising interest rates have made funding more expensive, forcing a reality check on their business models. The superapp approach, which relied on costly subsidies to attract customers, is facing a reckoning. To curb losses and achieve profitability, both Grab and GoTo have had to pare back certain business units, lay off employees, and reduce subsidies for services such as food delivery.

Grab, which recently reported a smaller quarterly loss of $244 million, saw slower growth in gross merchandise value (sales volumes) at just 3% in the first quarter of 2023, compared to 24% in 2022. Similarly, GoTo reported narrowing losses but slower growth in gross transaction value, which rose only 6% in the first quarter of this year.

While some investors believe the superapp model still makes sense for capturing daily activities, others doubt whether these companies can deliver consistent profits. They face competition from well-financed Chinese rivals and other emerging competitors in the region.

Co-founder and CEO of GoTo, Patrick Walujo, has been appointed as chief executive, leading some investors to speculate that restructuring may be on the horizon.

Despite the challenges, some Grab executives remain optimistic about offering multiple services and achieving profitability akin to Uber, which offers both food delivery and mobility services. However, critics argue that the superapp model may be spread too thinly and needs more time to mature.

As the superapps in South-East Asia recalibrate their strategies, they aim to find a balance between growth and profitability. Achieving success in this dynamic and competitive landscape will be a critical test for the future of the superapp model in the region.