How should banks prepare for a world of super apps and mobile financial services?
A new breed of tech giant is emerging out of the East – Super apps – and they are already encroaching on traditional financial services territory. Do you have a strategy for success in a super app world?
If you reside in the West, you may have heard of super apps. If you live in Asia, you probably spend most of your ‘screen time’ using one. So what exactly are super apps and why are they so revolutionary?
Super apps essentially serve as a single portal to a wide range of virtual products and services. The most sophisticated – apps like WeChat and Alipay in China – bundle together online messaging (similar to WhatsApp), social media (similar to Facebook), marketplaces (like eBay) and services (like Uber). One app, one sign-in, one user experience – for virtually any product or service a customer may want or need.
Due in large part to their versatility, super apps have quickly become ingrained into users’ daily lives. It is not unusual for a WeChat user in China to set up a date with a friend via instant messaging, make dinner reservations, book movie tickets, order a taxi and pay for every transaction along the way, all using one single app.
|While the rise of super apps in the East may seem like a fairly peripheral trend to the banking sector, the reality is they have the potential to up-end it.|
While the rise of super apps in the East may seem like a fairly peripheral trend to the banking sector, the reality is they have the potential to up-end it. There are three reasons why bankers should take heed of the developments very closely.
It would be easy to dismiss super apps as a China phenomenon, but the reality is they are emerging in almost every market around the world – and they are coming from unconventional places.
In South East Asia, for example, two super apps have emerged from the leading ride-share platforms, Go-Jek and Grab. Both apps now offer a range of other services from food delivery through to medical advice, and both are competing to help consumers select and purchase financial products. In markets – like Indonesia, a key battle ground for the pair – where the majority of the population are unbanked and lack access to basic banking infrastructure, they have come up with novel ways (like using their ride-share drivers as mobile bank tellers) to tap into new customers.
The West is also starting to move in a similar direction, albeit at a much slower pace. In part, the shift towards more all-encompassing apps is being driven by competition. Companies in almost every industry that do not want to become disintermediated by a super app are thinking about how they can become the West’s answer to WeChat and Alipay.
An evolution in consumer preferences is also driving the shift towards super apps in the West. Indeed, our research and experience suggests that – after nearly a decade of fragmentation and unbundling of services in their lives – consumers are starting to revert towards rebundling.
Instead of having multiple apps for ordering food, ride-sharing and payment options, they want just one. Consumers may not be specifically demanding super apps, but they certainly want the convenience and simplicity that super apps can offer.
|Consumers may not be specifically demanding super apps, but they certainly want the convenience and simplicity that super apps can offer.|
It might be difficult to try to compete in China against the likes of WeChat and Alipay, but it likely won’t be long before key players start to take an equally dominant position in other emerging markets like Indonesia, the Philippines and Malaysia. If your longer-term plans include setting up a digital offering in any of these markets, you may want to start thinking quickly about how to partner with the current market leaders.
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.
The other alternative is for established leaders to combine their power to create a Western super app. Many different combinations could be used to create a winning formula; not all of them require banks to be in the lead.
What can banks be doing to prepare for a world dominated by Super Apps and mobile financial services? Our experience suggests that – almost regardless of size and scope of line of business – bank executives should be considering four key aspects to future success:
Our view suggests that, at least for the next decade or so, the trend among consumers and businesses is towards super apps. The big question is whether banks understand how they will deliver value in a world dominated by super apps, and whether they have the ability to move quickly enough to respond before super apps become a super disruption.