COMMENTARY: Super Apps Are Coming. Don’t Get Left Behind

China has historically pioneered the evolution of money. From the ancient use of cowry shells as commodity money, the standardization of bronze coins around 1000 B.C., leather-made promissory notes during the Han dynasty, or the introduction of paper currency around the seventh century, China has shown the way. It should then come as no surprise that contemporary Chinese monetary innovations continue to wow the rest of the world now, particularly with the emergence of the super app. 

WeChat and Alipay, owned by Tencent and Ant Financial, respectively, have reinvented the way merchants target and take payments from consumers through their platforms. They provide merchants and businesses with the necessary tools to subscribe to a user base and search, target, interact, and transact with prospective and existing customers.  

Both started as chat engines and networking services, which enabled them to capture a user base (1.151 billion and 900 million-plus for WeChat and Alipay, respectively), and have evolved into indispensable companions for Chinese users. These platforms now encompass an entire ecosystem of services, including everyday consumer needs, online services and purchases, diverse use cases like news services, hiring domestic help, booking medical appointments, donating to charity, investing, and even games and entertainment.  

WeChat users spend a daily average of 66 minutes on the app, rocketing up to four hours for users that communicate, shop, or entertain themselves on the platform. The glue behind this stickiness is the presence of mini-apps. These are easily discoverable, fast-loading, quick-use, instant solutions for a particular use. Users access the required service on the super-app itself, and once it is delivered, the mini-app disappears, until required the next time.  This contrasts with the current approach of traditional apps that work independently of each other, competing for attention and space, linking merchants and users on a one-to-one basis. 

The funneling ability of these super apps, which allows them to operate as virtual marketplaces, is derived from the mind-boggling inventory of mini-apps present on the two platforms. WeChat had more than 2.3 million mini-apps as of early 2019, while AliPay boasted more than 120,000 as of January 2019, compared with 1.84 million apps on iOS and 2.57 million Android apps in the fourth quarter of 2019. 

Super apps aren’t just attractive and convenient to customers. A WeChat official account enables businesses to engage directly with consumers who follow them. Merchant communication can be as simple as where to find a service (for example where to find a charging station for an electric car) or as complex as funneling customers together to enable group discounted prices.  

Based on the strong relationship between consumers and merchants, super apps completely turn the traditional payment model on its head. The sheer volumes generated, and the underlying technology stack employed, allow them to charge merchant fees of 0.55 to 0.6%, undercutting what banks charge for credit and debit cards by at least 40%. 

The fundamental advantage that these super apps have over traditional business models is a near monopoly on consumer data. Access to data on where the consumers buy goods, how they buy, how much they spend, and what services they use is the biggest game-changer for them. Data-activated marketing is then based on customers’ real-time needs, interests, and behavior. 

This helps arm merchants with analytics on the number of launches, number of shares, comparison of app usage during different time periods, active user retention, average duration of visit, demographics, and so on. This powerful combination of social-media marketing platforms, communications systems, online stores, and payment platforms is what blows the competition out of the water. 

The big question for the rest of the world is, can this model be replicated elsewhere? New-age companies in the geographical vicinity seem to have taken notice. Singapore-based Grab and Indonesia’s Gojek are emulating WeChat and AliPay with a growing menu of services. Similarly, Line – the Japanese messaging service – is adding food delivery, taxi and payment services. Further afield, Brazil’s iFood and Colombia’s Rappi are also following in WeChat’s footsteps.

In the West, Facebook has replicated the super-app payments model. With 2.5 billion users worldwide and a portfolio that consists of the Facebook app, Messenger, WhatsApp, and Instagram, it is best positioned to do so. WhatsApp has already begun testing person-to-person payments in India, its largest market of 400 million users. It has also launched Libra, its cryptocurrency platform, along with the cryptocurrency wallet Calibra, to pair with Libra.  

Initially, Calibra will store money and enable quick transactions at low cost via Facebook Messenger and WhatsApp. It also has an initial list of brands like Spotify, Uber, Lyft, Mastercard, and eBay integrated into its payments ecosystem and will no doubt assimilate other third parties. 

To be sure, U.S. consumers have a longstanding love affair with their credit and debit cards, giving incumbents a seeming advantage. But customer loyalty with brands can change overnight if a better, easier, more intuitive, or cheaper option comes along. Consumers want personalized shopping experiences and specific product offerings. They want to be wooed with location-based discounts and rewards programs, which platform ecosystems can easily enable. 

Globally, consumers have also been primed for change by the sheer simplicity and convenience that e-commerce platforms have offered. New payment methods introduced by tech giants like Google, Apple, and Amazon have changed the consumer experience, perhaps leading users toward embracing super apps. Demographics could also play a key role here as the next generation of digital-native consumers take payments omnichannel. 

Should Facebook’s step into the payments space succeed, it will encourage more such super apps to come into the market, thus transforming the current payments paradigm—and beyond—by offering merchants a one-stop shop for advertising to, communicating with, analyzing, and transacting with customers. In fact, the trend could go beyond payments and may be the future of how we transact online. 

—Jay Nair is a senior vice president at Infosys Ltd., where he leads the company’s financial-services business in the Americas.