The Asian landscape

The Chinese leapfrogged from telephones to smartphones, which has allowed the local dominant internet companies to develop super apps that have not been seen in the West. A super app is a single app that does almost everything – from buying an evening takeaway meal to hailing a taxi, chatting with friends, arranging a loan, and even booking a restaurant or cinema ticket. This is a ‘winner takes all’ app. Super apps come in all shapes and sizes. Some are financial services-led, some are winner-take-all lifestyle apps, and there are aggregator apps. Today, the two leading Chinese super apps are Alipay and WeChat, which are lifestyle ecosystem apps used by over a billion users. It is estimated that these winner-takes-all apps have more than one million different services created by third-party companies and are accessible within the Alipay and WeChat super apps.

Chinese internet companies think differently by building entire ecosystems, whereas in the West companies such as Nike are product-centric apps. Under Chinese law, all companies are compelled to hand over that data to the Communist government. These lifestyle super apps generate a lot of personal data that can be collected and analysed. Grab – which was originally a transportation company that now offers food delivery and digital payments services – is another super app, headquartered in Singapore and used throughout Southeast Asia, especially in Indonesia.

The journey to the West

In the West, there are rules and regulations around personal data privacy that have created a lot of complexities for aspiring super app companies. Hence, there are limited examples of these Chinese lifestyle super apps gaining any traction in the West, even though there are examples of Western companies catching up with their Asian counterparts to offer super apps with a new twist. This is building upon a key trend already known in the payments industry: consumers enjoy having a single place where their tokenized credit cards, debit cards, and bank account information are all stored.

The Buy Now, Pay Later (BNPL) company Klarna has unveiled its super app that consolidates shopping, payment management, product delivery, and product returns. This is a financial services-led app – not as ambitious as Chinese super apps, however, based on Klarna’s recent acquisitions, there appears to be a strategy for reaching that point. The conversational commerce tech startup HERO was acquired by Klarna in 2021, which connects online shoppers with in-store retail associates. In 2021, it also bought the Germany-based discount shopping platform Stocard, which stores customers’ loyalty and rewards cards in one place, automatically applying any discounts at checkout. More recently, Klarna completed in April 2022 the acquisition of the price comparison platform PriceRunner, which it plans to integrate into its super app. This is an interesting development of the Western super app, which brings together Klarna’s growing community of 250,000 merchants, including H&M, IKEA, Expedia, Samsung, ASOS, Peloton, Abercrombie & Fitch, and Nike. This is not a product or brand-centric strategy, and it is not a BNPL-only solution – but an end-to-end shopping solution which empowers consumers from product discovery to how they pay, delivered through embedded financial services.

The race to build the future’s super app is underway with the French startup Lydia having onboarded more than 5.5 million customers to bank, invest, and send money to each other. Tencent and Accel joined Lydia’s Series B and C investment rounds. Since 2013, Lydia has raised over USD 100 million, and its target is to become a financial assistant super app for millennials and Gen Z. Revolut, Robinhood, and N26 have similar ambitions.

The future of the super app is much more than banking and payments. Looking beyond what Klarna, PayPal, Shopify, Square (or Block) are building today, the future will be to create an ecosystem for shoppers and merchants by leveraging data to bring them together through innovative shopping experiences and new customer journeys. By smartly using data and analysing spending patterns of customers, companies could eventually aim to become a comprehensive one-stop-shop for consumers in a specific category, such as car or home ownership, travel, insurance, or healthcare – operating in a wide range of verticals and providing diversified products and services.

Walmart has recently shown early signs that it has the intent to launch a super app through a series of announcements. At the start of 2021, for example, they announced the creation of a fintech startup in partnership with investment firm Ribbit Capital, which will aim to deliver financial services targeted at Walmart’s customers and associates by combining Walmart’s retail knowledge and Ribbit’s fintech expertise. More recently, in January 2022, the company announced its acquisition of online banking and overdraft protection provider ONE Finance and earned wage access provider Even.

Looking ahead

Artificial Intelligence-powered financial assistants that can offer personalisation and budget automation for consumers will be one of the services available in the future. For the merchant, there will be a greater ability to target consumers through AI-driven data analytics, allowing them to improve conversion rates because products will be pre-matched to consumers that want to buy them.

The super app of the future will combine a wide range of payments, banking, credit, investment, and insurance products in a single platform, allowing users to store important documents and access credit cards, bank details, biometric information, and even medical records on their smartphones – not a super app but a super wallet. Super apps and super wallets aim to reduce online payment friction and increase sales by storing and confirming the customer’s payment credentials and shipping information will come and go based on consumer adoption. We have already seen the one-click checkout start-up FAST launch and fail within just a few years. Others will likely fail to create the future that consumers want. A clear battleground is emerging to provide one seamless app with key financial services that mainstream consumers need. Bolt, Shopify, Klarna, PayPal, and Stripe are making this space look extremely crowded and could be making it more confusing for consumers to manage their lives online.

A smart wallet is not smart if it is not simple to use.

Beatrice Sava, an EDC Consultant based in the London office, provided additional research and analysis for this article.

This article first appeared in the 7th edition of the Payment Methods Report 2022 published by the PayPers.

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).

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