Ivan Maryasin, Co-Founder and CEO at Monite
The super app imperative
What are legacy banks for? It’s a question these giants are used to hearing. But now their neobank and fintech competitors — most of them younger than a decade old — are being put under the same spotlight.
Their original visions are starting to look too narrow. End users are running out of patience with an app environment that expects them to do all the hard work of discovering, learning and managing multiple digital tools. They want it all in one place, with one interface and one learning curve.
The most successful digital-native fintechs, like Revolut and Square, are already engaged in a headlong rush to become “super apps”. They have branched out from a core proposition and are now rapidly accumulating the broadest range of capabilities. Instead of offering a single or limited number of services, they are shooting for one-stop-shop status, where end-users can carry out any transaction or service they are likely to need. Having gained the trust of their users in one area, they are busy leveraging that confidence to encourage adoption of new functionalities.
Square started in 2010 with a simple POS system. Today, it is a platform for merchants with contracts, cashflow analytics, invoicing and payments, project management, a customer database, build-your-store, and a lot more. Revolut has announced expansion into decentralized cryptocurrency wallets, the mortgage sector, and, most recently, expense management, as it pushes ahead with its own strategy to become a super app.
And, as the footprint expands, fintechs can bundle functionalities to offer users a better deal. For example, you can execute trades with Trade Republic, or you can do trading plus a bunch of other things with Revolut, for a way cheaper price. Other industry-leading examples include Klarna, PayPal, Oxygen, SoFi, Robinhood and Affirm, which are all bundling add-on services to create a diverse offering within a uniform customer experience.
In fact, history tells us this is all to be expected. As long ago as the 1920s, General Motors developed the technique of continuous differentiation: Educating consumers to expect new bundled features with every annual model upgrade. The super app phenomenon is the same strategy applied to financial technology. Stickiness increases directly in proportion to the breadth of offerings.
What are super apps?
Super apps collate multiple applications into a single interface to provide an ecosystem of fully-integrated third-party services, facilitated by a payment system.
The concept isn’t new. China’s WeChat started out as a simple messaging platform and has grown into a lifestyle super app with over 1.2 billion users and an ecosystem of more than a million mini programmes. It’s a trend seen across Southeast Asia, India, and South America — AliPay (China), Gojek (Indonesia), Grab (Southeast Asia), Zalo (Vietnam), Paytm (India), Rappi (Columbia), and Mercado Libre (Latin America) — while also emerging in the West.
There is a distinction here between fintechs who started with one offering and are broadening out, and aggregators who have created digital experiences or marketplaces and connect users to an existing ecosystem for digital banking and financial services. Examples include Curve, PayPal, Google, and Apple. This approach favors organizations with existing platforms and is therefore likely to be less attractive to fintech startups.
A super app strategy should appeal to any existing digital platform (or currently platform-less organization) with a large number of users who have a common business purpose or lifestyle. With a super app, they can then combine existing data about end users with new insights derived from across the end user’s range of activities and interests.
By taking those insights and putting them into the wider context of what they reveal about the customer, the super app has the potential to become the gateway to workflows that deliver what a customer wants to get done — rather than just a series of disconnected financial services.
With embedded finance and open banking, any provider has the potential to become a super app, although an existing large customer base is an obvious advantage to become a world-class leader. With their enormous legacy client bases, and still-trusted brands, legacy banks should be all over this — although many are not.
Neobanks and fintechs currently focusing on point functionality need to take a hard look too. As players like Revolut expand their footprints, then a restricted product/service set is going to look less and less attractive to subscribers.
How to create a super app
There are two ways to expand from a core offering: Build or buy. Build, which typically involves raising funds to develop new code from scratch, was the standard approach until relatively recently. Obviously it is expensive, slow and high risk. Plus you’re putting a huge pressure on hiring new talent, which is one of the most difficult things for any business to do well.
White label was the conventional ‘buy’ tactic but it cannot deliver a true super app, because it involves linking your application and someone else’s application and calling it one product. A white label product might have your logo on, but it doesn’t belong to you: It’s hard to understand what’s happening inside the software and to connect it to your main program. White labeling also won’t do anything to increase engagement or the “stickiness” of your core app, which is usually one of the main points of adding new functionalities.
Hedged in by these restrictions on both the build and buy sides, super apps used to be super hard to create. But that is no longer the case. It’s becoming easier thanks to another ‘buy’ option – embeddable capabilities – which is now becoming widely understood and available.
Embedded finance leverages APIs to incorporate functionality into apps and websites quickly and seamlessly. It prevents compromises on branding and UI, and leaves the platform owner in full control of the UX and the user data. With just API integrations to worry about, embedded finance is much faster and less risky than the build option, and it’s not even close – buying embedded finance products versus building them can save months of work and literally millions of dollars. Even if your company does manage to build its own financial products and services, these likely won’t be anywhere near as good as ones coming from a specialist provider that focuses only on building these types of things.
Where next for super apps?
Extrapolate from where we are today and it isn’t hard to see that the future winners will be those who embrace a super app strategy. They are already cutting across more limited or slower competitors and choking off their growth.
Quality of tech is not the issue here. Embedded finance ensures that it will be uniformly good across the board. USPs are going to hinge more on factors like customer understanding and trust, and market specificity. You don’t have to be Revolut to provide a super app. There will still be giants, but now we can have super apps serving niches too.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.