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Super apps are a collection of mobile services combined into a single ecosystem and with a common interface. They bring a raft of different services together under one digital roof. Many started from scratch driven by a few entrepreneurs, modest investments, exposure to an emerging market, and a small user base. Now they are worth billions of dollars and compete with large tech platforms. But is there still room for start-ups in this market?
Before we get there, let’s look at the super app business model first. A super app is based on one or two anchor services, that is, an anchor service that sits at the center of the super app with other services radiating from it like spokes from a wheel hub. The anchor could be taxi services, food delivery, telecom, payments or e-commerce. Because other services are built around the anchor a super app can grow indefinitely. It’s hardly surprising then that many super apps are breaking records in terms of the number of users and the billions of dollars they are attracting in investment.
Three categories
Interestingly, most mobile super app ecosystems are concentrated in developing countries such as China, countries in Southeast Asia, the Middle East and Central Asia. But regardless of the region, super apps can broadly be divided into three categories.
The first includes ambitious start-ups that started small and quickly became successful because they were in the right place at the right time and with the right product. For example, the Malaysian super app Grab was founded by Harvard graduates using a grant of $25,000. Today the company is valued at $40 billion. The second category is super apps that emerged from a large company with a specific focus. Kazakh Kaspi.kz for instance, grew out of a banking application. The third category is a super app created by a technology corporation, such as WeChat, owned by Chinese tech giant Tencent.
Technology giants and companies, such as banks and telecom providers, are certainly moving into the super app space. And they have certain advantages such as big data and powerful analytics systems, which increases the chances of creating successful add-on products.
Room for start-ups
That said, there is still room for start-ups. It’s important to note there isn’t a single recipe for a successful super app, much of it depends on the market it is aimed at and the needs within that market. This levels the playing field somewhat. However, there are some factors that are common to super apps which influence success and which start-ups going into this market need to take note of.
One of the most important is data and knowing your customer. The task of any super app is to predict the user's needs in advance and offer a new service in a timely manner. Data is the key to this prediction. The more data you have, the better the algorithms to build better ecosystems. As such technology giants, banks and telecom providers are looking at the super app model because they have big data and powerful analytics systems, which increases the chances of creating successful add-on super app services.
Start-ups need an idea that people will gravitate towards. It doesn’t need to be radically new though, you can start by considering existing needs. When developing the HUMANS.uz super app we looked at the universal needs of the consumer. They needed a convenient service to help them carry out everyday transactions without any extra effort, transfer money to relatives, pay utility bills, and make loan payments. As a result, we combined banking services with the services of a telecom provider and simplified the registration process for both services.
Start-up advantages
Nuanced services also play a decisive role for our clients. This includes, for example, cashback for paying for public services, tariff customization, the ability to order a bank, and a SIM card with home delivery. And in essence this is a start-up, that is, to offer a more convenient and efficient way to perform routine tasks.
In this sense, start-ups have an advantage over large corporates who because of their size are less flexible, making it difficult for them to adapt to customer needs. Of course, in terms of resources, start-ups lose out to corporations. But start-ups do have a distinct advantage and that is closer contact with the user. For example, when the Colombian super-app Rappi was launched users could ask tasks of couriers. This could be requesting someone to walk a dog, or asking a courier to withdraw cash from an ATM on their behalf because they couldn’t leave the house. In this sense Rappi users also influenced the functionality of the service.
A good understanding of the target audience is also essential. This has certainly helped grow African super apps, even though they do not have a large amount of customer data. Mobile phones in Kenya, for instance, have only become ubiquitous relatively recently. Building on this the Kenyan service M-Pesa enables users to conduct different types of transactions using a simple push-button phone, and intermediary agents that replace banks and ATMs.
New territories, new services
Interestingly, super apps are most successful in developing countries. This is because they leverage the lack of infrastructure and don’t compete with larger conservative players. Rather they carve a space in local markets by introducing an easy-to-use centralized system that out competes existing chaotic systems which are typical of many developing countries. In Iran, for example, the Snapp app has captured 85% of the taxi market which was previously dominated by unlicensed private carriers. It’s success is also due to cutting out the middleman, which unlike similar operations in the US and Europe, are absolutely dependent on the middleman.
A strong example of a market with great digital potential is Uzbekistan, where 60% of the population is under 30. They are ready to use mobile services, including fintech services, but local organizations lose sight of this audience and its needs. This is one of the reasons we launched in Uzbekistan. At a general level such regions are ideal territories to test your ideas and improve products. However, entering a local market is not always easy unless you understand market needs and your target audience really well.
In a new market, you need to be ready to defend your interests against incumbents and respond to changing market conditions. This is especially true for start-ups that plan to cover several countries at once. You also have to adapt to constantly changing regulations, and sometimes new laws can lead to adjustments to the entire business model.
Identifying the anchor
Start-ups also have to identify the all essential ‘anchor’ service and then experiment with lateral services that flow from the anchor. They need to calculate their steps accurately and understand the target audience as deeply as possible in order to identify anchor services. It’s not always necessary to invent something radically new, rather an anchor service can be one that builds on something that meets existing needs. For instance, one day you pay for internet access via the super app and the following day you use other services to book a doctor’s appointment or apply for a visa.
In terms of monetization, each new super app service increases screen time and with it revenue and importantly customer data. As data accumulates it becomes easier to understand and anticipate customer needs, stimulate them into other actions within the super app, and also gain insight into new services users are interested in.
That said, a start-up should enter the market only if it has a well-defined revenue anchor, an understanding of how to exponentially increase screen time and deep insight into the target market and audience. In short, give the client something that others don't, or create a perception that you're providing something unique.
2022 and super apps
The big question though is whether super apps have a future in 2022. There isn’t an industry consensus on the future of super apps. Some believe the model is exhausted and tightening regulation in many countries will hamper super app development. Others believe that super apps are the future because they meet a growing need and are also the chief way of gathering valuable data.
The current situation in Europe is likely to lead to an increase in inflation in all countries. Ironically, this will improve the economy of developed countries because during inflationary periods more borrowed funds and investment monies flow into high-tech areas. In such circumstances investors can certainly gain high returns. This will also increase the number of projects and competition too. As for Humans our finances as a commodity model in the face of rising inflation is a winner. Consumers are trying not only to save their money, but also to earn money, to make their income growth greater than inflation. Any tool that is easy-to-understand and easy-to-use for ordinary consumers will be in demand given that in times of economic uncertainty income is the one thing that interests most people.
So is there still room for start-ups in this market? Most certainly.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Abhinav Paliwal CEO at PayNet Systems- A Neo Banking Software Platform
12 August
Raktim Singh Senior Industry Principal at Infosys
09 August
Alex Kreger Founder & CEO at UXDA
Steve Morgan Banking Industry Market Lead at Pegasystems
08 August
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