Wanna Build A Super App? Try Embedded Fintech First
By Ian Kar
Something that’s irked me over the last few years is the rhetoric around building a financial super app. Before, we talked a bit into why companies want to rebundle financial services—it increases revenue and retention for existing customers and it’s got really easy to build new digital financial services from scratch.
But just cause you can do something doesn’t mean you should. And I think most fintech companies should stay away from being a financial super app and stay focused on their core value proposition, and expand into new products only if it makes sense.
Historically, the whole idea around a financial super app really originated from China—in apps like Alipay or WeChat Pay, users could initiate a bunch of different financial transactions. But there’s a reason this worked in China—traditional financial systems and products like payment cards weren’t easily accessible there, so tech players needed to create digital systems for money movement and transacting for their users. The traditional payment network between merchants, banks, and consumers didn’t really exist, and there was only cash-based transactions to compete with. Also, as FT Partners Research notes, regulation in China was a lot more lax around banking and financial products for Chinese companies, make it easier to build financial products directly. (BTW—if you haven’t read the FT Partners Research note on Super Apps, check it out here—highly recommended spending some time reading through it if you’re interested in the topic.
But another layer that is less discussed is that Alipay, WeChat Pay, and others were capitalizing on a robust and highly engaged platform—Alipay was a subsidiary of Alibaba and WeChat Pay is an offshoot of WeChat, the social media platform. Users on Alibaba were already transacting a ton on the platform, but more importantly, Alibaba had both merchants and users it needed to pay out (for fees, returns, etc) and doing that in an economy that’s predominantly cash is extremely hard. Similarly, WeChat was already building a robust e-commerce ecosystem that helped users buy digital and physical goods and services (micropayments to creators, payments for taxi’s, etc.) In both cases, building a solid financial infrastructure dramatically improved their core product’s UX and functionality. Everyone in fintech talks about how to build a super app by providing value through cheaper, more accurate, financial services—but, in my opinion, the real reason Asian super apps worked is because the financial layer made the core product more engaging for users and sticky. Because that worked, Alipay and WeChat Pay were able to easy expand into a huge ecosystem of financial services that were offered digitally.
US fintech companies haven’t been able to do the same. Most apps are pretty one dimensional—they offer one core product and a few services that aren’t as popular as the core one. I think one underleveraged strategy is using the data from your core product to augment your ancillary one. If your core product is a checking account, adding stock trading might seem like a natural extension—you already hold funds, so its easier to get people to invest—but leveraging spending and deposit data to help underwrite microloans might be a better strategy to start off with.
But even then, I think building a super app that’s solely a bunch of financial services bundled into one app is probably dead-on-arrival. The average consumer doesn’t want to think about financial services all the time. Finding the right audience, suite of products, and executing the right tactics is almost too hard nowadays, with how competitive consumer fintech is and how many different players there are in the ecosystem now.
One strategy I haven’t seen implemented yet? Leveraging embedded fintech to expand your reach and distribution. Everyone hear “super app” and thinks of a financial WalMart, a store where you can get pretty much everything. I think a better strategy could be to create a strong brand and core product with tons of value—lets say a neobank with a strong rewards program—and embedding your core product into other platforms, partners, and services that already have an engaged audience. Then, use your brand and relationship with users to funnel them into an app that has really robust capabilities.
You hear a lot of talk around super apps from public companies or late stage startups—I think that’s because both public market and late stage investors love that story. But, at the end of the day, US consumer fintech companies that are pursuing a super app strategy are doing it for business reasons, not because it solves problems for users. I think thinking about turning your core product and competency into a B2B product to sell into existing ecosystems, and leveraging their engagement and distribution to build your super app audience might be a great way to reach the same goal. The other option might be to build an Alibaba or WeChat, though that’s pretty hard from what I understand. 😂