Thailand's fourth-largest bank also said the tie-up will allow it to use Grab's data on merchants and drivers to formulate loan products and minimise non-performing loans.
"Our co-branded mobile wallet and strategic investment in Grab enables us to bring Grab's scale to our merchant and consumer network in Thailand," Kasikornbank President Patchara Samalapa said in a statement.
GrabPay is one aspect of Grab's strategy to transform into a technology firm from being purely a ride-hailing business - a business not yet fully regulated in Thailand. The service is accessible via Grab's smartphone application, and in Thailand will be branded "GrabPay by KBank".
Patchara also said Grab's app will be integrated with Kasikornbank's K PLUS app, and that the bank will eventually provide loans via apps.
"This also advances our ambition to build an Everyday Super App to serve the daily needs of our consumers," Grab Thailand chief Tarin Thaniyavarn said in the statement.
GrabPay by KBank will compete with TrueMoney from True Corp PCL as well as Rabbit Line Pay from messaging application LINE - owned by South Korea's Naver Corp - offered in conjunction with local telecommunications firm Advanced Info Service PCL and mass transit firm BTS Group Holdings PCL.
Kasikornbank is the latest financial institution to form a partnership with Grab as the tech firm expands in the sector, with other partners including Malayan Banking Bhd and Mastercard Inc.
The investment, while relatively small, is the first from Southeast Asia's second-largest economy.
It is part of a funding round in which Grab has so far raised about $2.7 billion from investors such as Booking Holdings Inc, Microsoft Corp, Toyota Motor Corp and Hyundai Motor Co, as well as financial institutions including OppenheimerFunds Inc, Goldman Sachs Investment Partners and Citi Ventures.
(Reporting by Chayut Setboonsarng; Additional reporting by Aradhana Aravindan in SINGAPORE; Writing by Patpicha Tanakasempipat; Editing by Christopher Cushing)
By Chayut Setboonsarng