On Fintech super-apps and ecosystems
Borrowing from 10+ year hands-on experience and 2 global projects
Several headlines about (1) X platform, fna Twitter planning to launch P2P transfers in 2024, ostensibly a roll-back from original bold claims to become an “everything app” with a plethora of financial services baked in so that users won’t need a bank account (2) Gartner producing (yet another) forecast about superapp substantial uptake expected in coming years — return the clock in the new year cycle to the era of super-app.
Certain fintech futures depend on it: subsidising the user-base with the core service requires them to recoup capital spent and demonstrate contribution margin from “all imagined” additional services their users would consume.
At the time of near-mandated open-finance this becomes challenging: building walled gardens becomes hard — and so users inter-connect to other specialists for other services they seek.
Blindly copying Asian wallets is a folly: the conditions these were concived follow the logic of a “leapfrog” not from finance, but of the underlying consumption and substitution of physical delivery infrastructure.
One starts with a realisation of what core function does the original proposed service carry to the user-base:
It always starts with consumption:
- Amazon’s payment infrastucture serves to lower the friction to buy things: a careful balancing act between cost of fraud vs. basket churn. Finance supports the marketing act — testing infinite number of offers users act on emotionally.
- Alibaba / Taobao’s payment function — segregated as Alipay served the same purpose of allowing users to load balance to buy from a sprawling marketplace — that grew faster than “analog” physical infrastructure in China.
- Existing user-base can appreciate and engage with a particular platform for the core service it renders — but churn away if enmeshed with additional (unnecessary) services that complicate the experience.
The original idea of X.com created by Musk in 2000 was an online bank: a service primed to the expected rise of internet-consumption. Merged with Confinity (a company behind PayPalm service), it gave birth to PayPal — almost a synonym for a wallet one needs to send and receive cash over the Internet. Looking at PP today, it remains a major player in all things related to transacting on the web: those services with which the Company succeeded with are tied to the user-case of consumption (eg., “Pay in 4”)
A repeat of X.com vision today is an unnecessary spend of resources (and whatever remains of the Twitter user-base) — unless regulation comes to severely curtail all other available market-driven mediums of value exchange in the geographical domain where X is most active: building a global financial platform will be rife with limitations in terms of regulation: Facebook failed with its global vision in part because of that.
The lowest common denominator of a super-app is the cost of retention and engagement of users: the frequency to solve (consumption-related) user-cases through the single interface.
This increases platform’s chances to x-sell additional services related to the core needs — that are articulated and always highlighted. Failure to design the additional services or failure in communication leads to increased churn — and results in actual higher retention costs.
What has been the norm during times of negative cost of capital — startups subsidising their growth with investors money — is no longer applicable. This adds to the risk of a super-app strategy.
