The Super App Model May Not Be Suitable for the US Marketby Fintechnews Switzerland August 29, 2022
Super apps may be widely popular in Asia and quickly gaining ground in Africa and Latin America (LatAm), they have little chance to succeed in the US because of lacking consumer interest, cultural barriers as well as data privacy and security concerns, a new report says.
In a new blog post, Ron Shevlin, chief research officer of advisory firm Cornerstone Advisors, looks at the rise of super apps in parts of the world, delving into the drivers that have contributed to their success and making a case that replicating that success in developed economies like the US is going to be challenging given the cultural, regulatory and consumer trust barriers.
In Asia, super apps have risen to dominance out of necessity. Firstly, most Asian consumers own “under-powered smartphones” that aren’t suited to manage 40 to 50 separate apps,” Shevlin says. This is not the case in the US where most consumers have smartphones with “plenty of horsepower.” Also, most American consumers don’t mind having 25 to 40 different financial relationships, implying that there is no immediate need nor demand for an all-encompassing app, he says.
Secondly, some Asian markets have strict app marketplaces regulations in place, forcing industry players to find innovative ways to offer consumers the services they want despite the limitations.
In China, for example, the Google Play Store isn’t available, the Apple App Store has a limited offer, and Huawei’s AppGallery lacks many major apps. This has prompted Internet giant Tencent to introduce in 2017 its mini-programs scheme, allowing third-party developers to launch mini-programs within its WeChat ecosystem for end-consumers to use.
Moreover, concerns over data privacy and security could potentially jeopardize the uptake of super apps in the US. Plenty of research have found that Asian consumers tend to be more willing to share data with service providers than their western counterparts.
Super apps’ rise in emerging markets
Super apps are mobile or web applications that provide a variety of services ranging from banking and shopping, to travel planning and food delivery. They act as an all-encompassing self-contained commerce and communication online platform, focusing on ease of use and customer stickiness.
These platforms have risen in popularity in Asia with players like Tencent’s WeChat in China and Grab in Southeast Asia have gained millions of monthly transacting customers.
Headquartered in Singapore, Grab started out as a ride-hailing and transportation app before expanding to food delivery, digital payments and more. The company had 24 million average monthly transacting users in 2021, according to its full year results, and debuted on Nasdaq last year following a US$40 billion merger with a special purpose acquisition company (SPAC) – the largest blank-check merger at the time.
WeChat is a Chinese multi-purpose instant messaging, social media and mobile payment app, allowing users to pay bills, transfer money, book tickets, create company accounts, and more — all in the convenience of a single platform. WeChat became the world’s largest standalone mobile app in 2018, with over 1 billion monthly active users.
Since its birth in Asia, the super app phenomenon has spread around the world and is now gaining ground in Africa and LatAm. In Egypt, MNT-Halan (formerly Halan) began life as a ride-hailing app for two- and three-wheeler vehicles back in 2017 before expanding into an extensive fintech ecosystem that combines a digital wallet, bill payment services, e-commerce with buy now, pay later (BNPL) and micro and consumer loans. Today, the company claims 1 million monthly active users, and more than four million customers in Egypt.
In Kenya, telecommunication company Safaricom, launched in 2021 its M-Pesa super app, allowing small and medium-sized enterprises (SMEs) to create their own business apps within the M-Pesa mobile money ecosystem and access Safaricom’s 25 million mobile money customers in Kenya. M-Pesa super app claims over 2 million active customers on the mini apps.
In LatAm, there is Rappi, a Colombian tech company that started out as an on-demand delivery company before launching into more than a dozen verticals, including banking. There is also Inter, a Brazilian fintech company that operates across banking, credit, investment, insurance and shopping.
No super app has emerged out of the US yet, but several big tech companies including Block, formerly Square, and PayPal have started pushing the idea.
Block co-founder Jack Dorsey has shared aspirations to turn the combination of its Cash App and Afterpay BNPL service into a super app.
And last year, PayPal launched the first version of its super app, offering a combination of financial tools including direct deposit, bill pay, a digital wallet, peer-to-peer payments, shopping tools, cryptocurrency capabilities and more.
Featured image credit: Edited from Unsplash