The Super-App Trifecta ??

Speed of light – that’s how fast trends seem to keep jolting in the present world of finance. A few weeks back, we analyzed the?confluence of the two biggest megatrends ?in the form of neobanks offering buy now pay later (BNPL) products that were making headlines. Today, we extend that confluence hypothesis even further and look at the confluence of the triumvirate that is redefining the way financial products are ideated, conceptualized, launched, distributed, and commercialized. The third entity that we are referring to is the participation of non-bank enterprises in financial services – another megatrend that is also known as embedded finance.??

We are—quite evidently—jumping the bandwagon of the ongoing hype around super-apps and the buzz that they hold for being the topic of discussion for every fintech fanatic. Just like the many divergent lanes that traverse into a freeway, the overlap of various fintech segments have their differentiated offerings to deliver and play an important role in the complex all-in-one, lifestyle ecosystem.?

Scrutinizing these independently growing lanes of non-banks, neobanks, and BNPL players, they merge to form high-speed freeways of Lifestyle Banking, Embedded Lending, and Credit-extending digital banks. These are the intermediate pit stops that firms have been taking to reach the ultimate destination of becoming a super-app. Several successful stories across geographies have set the ground for this trend to become a global phenomenon – with examples of WeChat (China), Grab (Singapore), Klarna (Sweden), and Tinkoff (Russia) amongst the first few to embrace the exploration in the unknown and emerge as super-app stalwarts. The journey of each of these innovators entails three key steps – the inception point, the transition phase, and the final destination. Understanding them through these phases provides a clear insight into the inner workings of these players.

Demystifying Super-app Playbooks

A lot of the modern-day super-app candidates embarked as standalone service providers with niche attributes that earned them a name in their respective industries.?

Non-banks have embraced the proposition of embedding contextual financial services in customer journeys with an intent to reduce friction, improve purchase experiences and increase sales. For them, the inception point involves the offering of core sectoral products such as e-commerce, travel, entertainment, retail stores, etc. Once this is established, these facilitators embed financial products—mostly beginning with payments and micro-credit—to improve customers' ability to buy their core products. With increased adoption from customers, they unfurl the whole suite of financial products such as a bank account, debit card, insurance, etc. to improve the customer’s experience as well as to diversify their revenue streams and optimize their operating costs. Non-banks end up partnering with a gamut of technology and banking-as-a-service (BaaS) providers, or even acquire their own banking license to bring this embedded finance strategy to fruition.

Digital-first challenger banks have adopted a different playbook in their quest to first challenge the status quo of the financial industry and then to expand beyond finance. Catering to the digital-savvy generation that enjoys access to checking and savings accounts at lower fees and higher deposit rates, digital-first banks enter the market with the notion of a no-friction savings account plus debit card duo – with further goals of incorporating more transitional financial products pertaining to credit, behavioral insights, and even investments and insurance. In order to leverage their customer relationships and monetize their base, these digital contenders embed lifestyle products such as e-commerce, travel, etc., and build a strong super-app proposition.?

BNPL is the latest game-changer in this series of disruptive innovators, which saw payments in a new light that resonated with new-to-credit consumers. In a typical scenario, these platforms begin by offering micro-credit products to GenZ and millennials that put the spotlight on affordable credit to meet lifestyle needs. Their transitioning phase involves going through the world of e-commerce, where they aim to improve the checkout experience of consumers throughout the customer journey. This involves pre-purchase nudges to consumers, during-purchase seamless transactions and fraud-prevention, as well as managing the post-purchase interactions. Ultimately, these credit-solution providers integrate banking products and tread down the path of gaining a full banking license or partnering with BaaS providers.?Klarna’s “Shopping super-app” saga ?took this route for their growth strategy – establishing the removal of friction, first from the purchase journey for its users, and eventually extending its services towards the pre and post-purchase scenarios. Simultaneously, to extend its ability to offer banking services and be a part of the Open Banking trend, Klarna also applied and received a banking license from the Swedish Financial Supervisory Authority and launched an Open Banking platform.???

Each of these contenders has brought about their unique assortment of bring-and-get to the table, and the convergence of these three in varying spheres creates an incentive for further innovations to flourish upon.??

Ungrouping the Groups

Merge two new ideas and you get a whole new idea, oftentimes more powerful than its constituents. The fintech space left no stone unturned in adopting this ideology to make breakthroughs throughout the past few years. The brilliance behind this transformative result is the fact that any player, irrespective of its primary industry, today can build its way through the appropriate tools in becoming an all-inclusive powerhouse. The three-way blending of the candidates to ultimately lay the bricks for the creation of a super-app can be better grasped by understanding the interplay of these individual spheres.

Lifestyle Banking

With a mindset that is evolving towards union through motives and goals rather than physical boundaries, the merging of non-banks and digital-first banks saw the birth of a new era of what could be termed as embracing lifestyle-as-a-service where financial products are fabricated around life events that understand the diverse nature of each individual customer.

Brands like AirAsia wasted no time in virtualizing their travel offerings to align with the aftermath of a COVID-stricken world, corresponding to the aviation industry receiving a severe blow.?Air Asia?first experimented in the financial industry by launching BigPay in 2017, and then doubled down on its disruptor strategy by launching?Financial Marketplace by airasia money ?in 2021. The marketplace offers credit cards and personal loans in partnership with RinggitPlus, and also has plans to introduce comparison of financial products and solutions like insurance, investments, financial awareness and education, payments, as well as Islamic financial products and services.?By accelerating its technological infrastructure and working on establishing a shared community perspective, the airline brand introduced products and services across multiple verticals that were related to making the user experience a seamless delight – from fulfilling e-commerce, food, and travel services to integrating CleverTap’s push notifications for bustling conversions.?

On similar lines are – online mobile banking app?digibank by DBS, retail chain offering affordable furniture?Ikea, and Latin America-based delivery startup?Rappi?– each a multi-vertical firm that goes beyond just offering their respective products by letting consumers set goals, be inspired by personalized ideas, and receive on-demand services.

Embedded Lending

The finance sector has witnessed a paradigm shift in the way 'pay later' options are perceived – from a typical credit-card and interest-period lens to one that gives the power to the consumer to choose their funding options. The nexus of non-banks and BNPL players resulted in the formation of?consumer finance, where financial solutions by non-financial platforms take the pressure off of paying upfront. Instead, every option from credit and installment loans to BNPL is readily available to make the purchase journey flexible and fully integrated for merchants and consumers combined. Amazon is one of the leading examples of embedded lending, with three of its key banking-as-a-service (BaaS) offerings:

• Amazon Lending?- A partnership with Goldman Sachs’ Marcus enables Amazon to provide a credit line to its merchants to ensure they get the needed capital to continue selling on the platform.
• Amazon Pay?- An e-wallet for easier transactions within the platform at the time of checkouts via an Amazon account.
• Amazon Card?- An Amazon Secured Card issued by Synchrony Bank, as well as other co-branded credit cards (like with American Express) for consumers that come with attractive extras.

The embedding of credit within Amazon’s existing business is also turning tables for merchants and consumers across industries and geographies far and wide. With provisions of SME lending for merchants and BNPL for consumers, Amazon has been successful in building partnerships with global providers such as Affirm in the US, Nubank in Mexico, and Amazon-backed BNPL platform Capital Float in India.

Apple Card is another such crucial embedded financial tool that is a result of Apple’s partnership with Goldman Sachs. Consumers can make Apple Pay purchases in easy installments through four (Apple Pay in 4) or more (Apple Pay Monthly Instalments) payment plans through this credit card attribute. However, the adoption of embedded credit isn’t just limited to platforms in the US – many players globally have incorporated this convenience into their infrastructures. Mercado Libre launched the online payment platform Mercado Pago in affiliation with Bank Topazio – a partnership that has opened the doors for a connected economy in Latin America through its cash machine, digital accounts, and card operation features.

Credit-extending Digital Banks

When revolutionary digital banks join forces with BNPLs, it opens a new doorway on their path to profitability and improves their customers’ financial wellness by launching contextual micro-credit products that help them build a credit profile over time. We have covered this trend in detail in?one of our blogs .?

SuperApps: The Final Destination?

By now, we can derive that the concept of a super-app is based on the novel intermesh of financial products and lifestyle products assembled in a marketplace and orchestrated in partnership with ecosystem partners. For an innovation-borne notion to originate, such as that of super-apps today, poles-apart industries have to coalesce. Industries like travel, e-commerce and payments; entertainment, rewards, and credit; e-commerce and investments, etc. have to be interwoven around consumer lifestyle and behaviors to unlock significant value for the consumers, enterprises, and the ecosystem.

In the race of emerging as a behemoth, many contenders make for possible aspirants to become the next big name in the platform finance space. Messenger app WeChat, the Chinese 'super app' launched in 2011, presently is an island of daily functionality through its hub of 1 million mini-programs. By embodying an app-within-an-app ecosystem, WeChat has become a dominant channel for users to access services pertaining to education, transportation, living goods, apparel, logistics, and much more all under one roof.?

Singapore-based Grab is making headlines across Southeast Asia not only for its ride-hailing abilities but also for its move towards becoming an extension to daily life. The startup built on innovative services like GrabPay for cashless payments, and the ambition of going above and beyond to provide hotel bookings, food deliveries, and even healthcare facilities. Without a doubt, the super-app was sure to become a favorite of the region.

Apart from constituting their programs on the fundamentals of transparency, security, user experience, and inclusivity, these marketplaces are fabricated on two basic principles of organic or inorganic strategies for growth. Organic super-apps, such as WeChat, Kakao, Grab, Gojek, and Alipay have built their business models around in-house developments and strategies that layer the many services within their existing applications. On the other hand, brands like Klarna – which is known for its?million-dollar acquisitions? of shopping-experience providers – have platformized their brand name through third-party partnerships that support them in the quest of becoming a super-app. Nubank is the latest entrant in this pursuit, as the Brazilian digital bank has recently added three new product categories to its e-commerce marketplace – travel, pets, and games – thereby expanding its product vertical to ensure more diversified areas are also easily accessible to the consumers.

Whatever may be the ultimate methodology, the basic foundation of a super-app lies in blurring the boundaries between diverse industries and offering the benefits of uniformity, convenience, aggregation, and data protection to users who previously had to hop around a bunch of different applications. Consider it to be just like a buffet – you get served with a variety of delicacies to choose from, at the comfort of a single eatery. For sustaining such a complex but opportune experience, all the pieces of the super-app puzzle need to fit in conveniently. The future of such overlapping novelties remain unbound by the access to behavioral insights and consumer feedbacks on the go; and in the words of Prof. Scott Galloway, as long as the “likely epicenter of aspiring super-apps is fintech”, there shouldn’t be a stop for more game-changing innovations to make their mark. Here’s to the first 10 trillion-dollar company: a super-app in the making!

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