Elon Musk’s vision to transform Twitter into X.com has ignited a debate reaching far beyond social media. At its core lies a simple maxim that has long shaped the landscape of financial services: those closest to the customer win the market.
Setting the stage
In the 1980s, financial institutions sought to capture customers by offering a comprehensive suite of services, establishing themselves as the go-to, credible, and secure destination for all monetary needs. That’s why, nowadays, it’s common for people to take out a mortgage at the same bank as they have checking and savings accounts.
The launch of the first iPhone in 2007 signaled the next phase of this bundling-unbundling cycle. The arrival of the app and app store necessitated that services be tailored and uninterrupted for companies to remain close to each transaction.
Tech companies avoided “feature bloat” like the plague in these early days, recognising that any friction in usage could deter maximum engagement. This sentiment is well-reflected in Facebook’s launch of standalone apps for Messenger, Groups, and Events in 2011, 2014, and 2016, respectively.
Then, post the 2008 financial crisis, we saw a wave of fintech disruptors excelling in services tailored to different market segments. Unlike Google, Facebook, or Amazon, which originated on the desktop, the early days of fintech were centred around the idea of providing highly optimised services for specific market needs.
This set the stage for a multifaceted fintech landscape, where no single dominant player emerged. Users found themselves locked into a wave of unconnected and competing apps across neo-banks, savings, wealth management, foreign exchange, and more.
The successes of distinct, single-service fintech platforms paradoxically resulted in a landscape in which people’s payment experiences became more fragmented than ever.
This was the fertile ground necessary for open banking and open finance to flourish. These days, data is readily shared across multiple payment services. Application Programming Interfaces (APIs) are pervasive in virtually any industry, including financial services, representing a wealth of user data that can be leveraged to facilitate innovation, expand a company’s brand, or open up new revenue streams.
The abundance of APIs connecting different arms of fintech has made re-bundling fragmented branches of financial services possible. Put everything on your app, but let third-party apps handle your non-core competencies.
Enter super apps. The success of all-in-one apps like AliPay, WeChat, and Kakao in East Asia has sparked Silicon Valley's ambition to build an equivalent in the West, kickstarting a move towards the strategic re-bundling of said APIs.
Imagine relying on a single app for shopping, gaming, food delivery, transport, and travel, and all these verticals informing each other to optimise their curation.
The vision for such an all-encompassing platform requires horizontal integration with one critical common thread: an integrated payment function at its core seamlessly connecting all the services on offer. There are fintechs like Curve (disclaimer - this is one of our portfolio companies) who have been dreaming of an aggregated payment platform from all the way back in 2014.
Every service fundamentally depends on how they are paid for. WeChat started with instant messaging, and Gojeck started with ride-hailing, but they all needed a ubiquitous payment platform to join up its myriad of services.
A successful super app in the West would likely be the first $10 trillion company. Who are the likely contenders? Can existing fintech successes like Revolut, Brex, and Stripe metamorphose into super apps by adding ancillary services? Or will it be a service provider powered by a fintech entrant unburdened by the conflict that inevitably follows from being a bank?
In the West, companies don’t have the luxury of the protectionist regulatory environment that fueled the meteoric rise of super apps in Asia. You only have to look as far as the Microsoft/Activision Blizzard saga to see how powerful antitrust regulations have become when it comes to the emergence of new tech.
The general populations of Europe and North America also do less on their phones, compared to their Asian counterparts for whom the internet exists primarily on mobile. The dominance of Apple and Google’s operating systems in the West is another hurdle - the Apple app store can make or break the success of any app.
Regardless of how the future of fintechs pans out, one thing is certain - any super app must be designed to centralise the fragmented reality of today’s payment experience. Customers often face the prospect of juggling multiple accounts, crypto assets, and wealth across various currencies. If a super app outside of Asia were to ever take off, the demand for a seamless payment experience would be the driving factor that draws people in as customers. The race is on for fintechs and service providers alike.
Lead image: BoliviaInteligente