How many apps do you have installed on your smartphone right now? Ten? Twenty? At the very least, you have an app or two for messaging, another for email, and yet another for music and social media. If you’re like 65% of the U.S. population, you use a digital banking app, too.
A bunch of different apps for different digital activities.
It’s a pretty common scenario. But the tides might be shifting with the evolution of so-called “super apps,” which stitch together many different activities and customer journeys into single experiences. Super apps are already quite popular in other markets (China, in particular). To some extent, they’re gaining traction in the U.S. market, leading many to wonder if super apps might be the next big evolution in the Fintech market.
From Specialized to All-Encompassing: What’s a Super App?
There was a time when Klarna was dedicated to buy now pay later (BNPL)—now they’re expanding into e-commerce. PayPal and Venmo were once just payment apps—now they’re incorporating cryptocurrency and other financial services. You might have noticed that Transferwise is now Wise, a rebranding that’s giving way to far more expansive services.
What these and many other examples have in common is the single-ecosystem approach: one app that encompasses and integrates many different experiences. One place to deposit a check, purchase tickets to the game, or even apply for a loan.
Perhaps the best (and first) embodiment of this trend is WeChat. Branded as a “free messaging and calling app,” WeChat has more than 1.2 billion global users (as of Q1 2022). These days, their customers do much more than send messages. They can order a rideshare, if they want to, or buy public transit passes. They can remit payments, too.
A true “financial and lifestyle companion,” to borrow the words of Danil Ovechkin.
What Super Apps Mean for the Fintech Market
In the same article, Ovechkin reminds us that WeChat serves a different market than, say, the United States. Indeed, putting everything into a single smartphone-enabled experience doesn’t work for every country, or even for every demographic. Some go so far as to claim that Americans don’t need super apps at all because their phones are so powerful, and because it’s the providers, not consumers, actually driving this trend.
Still, as a recent paper published in BIS points out, “almost any large company that has or can leverage big data against a large customer base could become a big tech [and produce a super app].” Not surprisingly, two notable names are moving toward financial super-app status.
Walmart has made a handful of acquisitions that indicate its intention to build a financial services super app. With the company’s huge market and user base, it’s not hard to see the opportunity here in terms of adoption. Plenty of people go to Walmart for … well … everything. Why not go to their app for all things finance?
Then there’s Cash App, which has made notable moves toward becoming a super app of its own. The widely used platform now incorporates account aggregation, ID verification, card issuing, and more.
The rise and potential takeover of super apps presents a potential disruption for banks, in particular. How will banks respond when a superapp suddenly siphons off a large percentage of the user base for a bank’s mobile app? And what opportunities are there for banks to wade into the super app conversation?
By some measures, it’s already happening, albeit at a slower pace. There’s no question, for instance, that banking as a service has serious momentum. By some estimates, some 85% of the senior executives are already on their way to implementing BaaS in some form.
Then there’s the sheer size of the elephants in the room: the top four banks in the United States are all worth more than a trillion dollars. What’s more, financial services is the largest sector in the world, with “$16 trillion in incumbent market cap to be disrupted,” according to research from Coatue.
The opportunity is certainly there.
Where Embedded Solutions Fit into the Conversation
Does this guarantee that big banks will go all in on super apps? That remains to be seen, at least in the United States. What we do know is that they and other financial institutions have options when it comes to the underlying Fintech infrastructure required to build a super app.
Here’s what KPMG has to say on the matter:
“In markets where no market-leading super app has yet to emerge — there is still time and opportunity for banks to take the lead. One approach would be to leverage open banking architecture and application program interfaces (APIs) to bring an ecosystem of different industry players together within a single app. A cursory scan across the marketplace suggests there are already a number of tech firms stretching to do just that.”
When thinking about how such an ecosystem might come together, a few imperatives come to mind. As noted by Nasdaq, embedded payment and finance options offer a viable alternative to buying code or building it from scratch. Indeed, headless APIs, embedded payment options, and other Fintech innovations open the door for leaner and more agile product segmentation within the financial services sector.
Put simply, embedded solutions make it far easier for banks to bundle a variety of services and customer journeys. A lack of technology simply isn’t an excuse anymore.
Bringing these experiences together in a meaningful way for customers is where the challenge lies. As the minds behind the leading super apps have already figured out, it’s not enough to bundle anything and everything into a single clunky app. There’s some rather delicate stitching that needs to be done, one that accounts for myriad data, journeys, technologies, and personalizations.
The challenges of building a trustworthy and useful super app aside, it’s an exciting prospect in a sector that a) famously suffers from outdated business models and b) has incredible potential for explosive growth. Just look at embedded finance, where the addressable market exceeds $7 trillion.
The opportunity is certainly there, as is the tech. We’ll see what the leaders in banking and finance can make of it.