In Asia and other emerging markets, applications are connected under "super apps," or applications connected under a single portal, increasing efficiencies and ultimately providing users with a seamless experience when they use their phone. Financial, entertainment and social apps may be connected under one closed ecosystem. For example, the Chinese apps WeChat and AliPay offer customers everything from ride-hailing to making payments and more, helping to declutter smartphone screens and consuming less memory.
Given that fintech in the U.S. started by "unbundling" existing financial services and traditional bank offerings, using a cloud native architecture that leverages application program interfaces (APIs), the infrastructure is now in place for the "re-bundling" of services to create similar experiences. These can be targeted at micro-verticals, providing customers with easy and secure experiences to manage their finances. Super apps may also help traditional banks and fintechs improve the customer experience, making it more personalized and relevant. This will also help reach new customers and improve business processes.
To become a super app in North America, fintechs will need to experience a significant amount of growth. However, as the customer preference continues to shift towards convenience, the trend is worth keeping a close eye on.
I've always considered tech innovation in many parts of Asia, Africa and Latin America to be faster, leaner and more efficient than the innovation we see in the U.S. (or Europe). There are some areas where emerging market tech and fintech stand out tremendously:
Exponential curve of adoption: One of the reasons Asia and Africa are considered the leaders of payments fintech innovation is due to the lack of "legacy" that has helped them follow an exponential curve of payments adoption. Due to the lack of a major bank branch presence, these markets have jumped directly to mobile-based payments rather than the bank-to-bank payments or credit cards we see in the U.S. The transformation of banking legacy systems is happening in these markets as well; but mobile and WhatsApp-based payments have already captured a hefty chunk of the market.
Collaboration and fintech bridges: Fintech hubs like Singapore, Hong Kong, Nairobi and Dubai have formed hundreds of fintech bridges with each other, and with hubs in Europe and Latin America. There is collaboration on regulatory frameworks and sandboxes, data-sharing infrastructure and even go-to-market. The U.S. still has a long way to go in working collaboratively with fintech hubs outside the country.
Scale of adoption: The demographic factors of emerging markets, especially the lower mean age and the rising middle class, have helped these markets achieve scale for fintechs in a way we have never seen before. Fintechs have access to billions of potential consumers in Africa and Asia and enjoy flexible and open regulatory systems in most countries. The power of the community also drives highly efficient fintech innovation models around credit scoring and lending.
There are many lessons to be learned from emerging markets for U.S. fintechs, but perhaps the most important trend we're seeing and could learn from today is the Fintech super app.
A fintech super app is an application that combines a variety of services seen across other apps, and allows third-party developers to integrate mini programs inside the main product. One notable example is China's WeChat, by far the most recognized super app on the market today. WeChat arguably created the playbook on how to combine apps to create a marketplace of financial services including commerce, payments, loans all alongside their core chat functions.
This model has taken root in markets across the globe with companies providing a one-stop shop within their app. To name a few others, Rappi in Latin America offered delivery and payment services and recently added business loans to their offerings. Over in Africa, Chipper Cash has added crypto trading to their remittance platform along with Visa debit card capabilities, while in India, Paytm evolved from a P2P payments app into a super app by adding loan and investment capabilities.
In the U.S., our fintech and financial services are more fragmented. For example, a person may use Coinbase for crypto trading, Robinhood for investments and Chime for savings accounts, as opposed to accessing all of those under one roof. I'm interested to see if and when services like these will begin to merge over time, bringing the super app to the U.S.
Chief Innovation Officer at Citi; Head of Citi Ventures & Citi Productivity
It's no secret that the U.S. has been slow to adopt digital and contactless payment methods. However, if you've traveled to Asia in the last five years, paying for goods and services via a tap of your credit card or an app on your phone is ubiquitous. Even streetside vendors in countries like China either don't want or don't accept cash. The U.S. can learn a great deal about the future of payments by looking East.
As a venture investing team, Citi Ventures has been anticipating the trend towards digital payments and we've seen innovative companies emerge all across Asia to deliver seamless payment solutions. A great example is Citi Ventures portfolio company, Grab, a Singapore-based startup that rolled out its solution GrabPay to encourage and facilitate cashless payments.
Just as consumers expect frictionless, on-demand experiences in other aspects of their lives, mobile payments provide consumers with a more convenient, secure way to purchase items. In the wake of the COVID-19 pandemic, we have seen an extreme catalyzation of this trend in the U.S. I have no doubt that digital payment methods will only continue to spread rapidly across the globe.
Partner at CapitalG, Alphabet's independent growth fund
As we reflect on what has been an incredible decade of growth within fintech's emerging markets, two key themes emerge.
First, the rise of the mobile internet enabled the creation of massive digital payment platforms, such as Paytm in India, GoPay in Indonesia, M-Pesa in Kenya and MercadoPago/RappiPay in Latam. While many of these platforms began as payment providers, they are leveraging their strengths in payments to evolve into even more powerful consolidated commerce, local and marketing platforms.
Second, many emerging market governments have moved aggressively to make payments free and frictionless. India has built "UPI," an identity, payments and data layer that allows for easy payments and underwriting, and Brazil is launching PIX, an instant payments and open banking infrastructure. In these markets, governments are increasing access for un-served and under-served populations while also igniting new innovation in the local ecosystems.
Compared to emerging markets, the U.S. has a higher-cost, more mature traditional payments infrastructure. While government-based initiatives may not be on the horizon, we do believe that consumer and merchant payment costs will eventually decrease. When that happens, fintechs will need to find ways to drive additional value and revenue from their customers. We believe that they'll take inspiration from emerging markets by broadening their offerings beyond "access" to include more "value-added services." They could leverage payment information in the development of differentiated, software-led offerings in lending, commerce and spending.
We are entering an exciting decade for fintech — both in the U.S. and abroad. While there has been immense value creation in recent years, the best is yet to come.
A tech lesson U.S. fintechs could emulate from emerging markets is the creation of financial super apps. Financial super apps that offer many services in one place — from ride-sharing to chat to financial services — are increasingly popular in the Asia market.
There is an opportunity for fintechs to differentiate within the U.S. market by building a financial super app that customers can turn to for many different financial services. We're no strangers to offering services that customers wouldn't expect to get from a traditional bank or even an app. We added Side Hustle, a job-finding feature, to the Dave app in 2019 as a way to help our customers earn extra income to cover expenses. Customers have earned hundreds of millions of dollars through this service to date.
Through this success, we believe there is a huge opportunity for us to build a super app that offers a wide range of financial services that ultimately help improve our customers' financial lives.
One of the key things that has happened in emerging markets is that the business models of banking and financial services that were "copying deposit banking, but make it mobile and cool" — which has been an early playbook here in the U.S. — is leaving a lot of opportunity on the table. For example, in Southeast Asia, Latin America and Africa, it's pretty clear that being more expansive and offering a full experience such as lending, payments and super App features integrated around a banking experience is really leading edge. I'd look out for PayPal and others to evolve in this manner.
Kevin McAllister ( @k__mcallister) is a Research Editor at Protocol, leading the development of Braintrust. Prior to joining the team, he was a rankings data reporter at The Wall Street Journal, where he oversaw structured data projects for the Journal's strategy team.