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Elon Musk’s X app has taken another step in its quest to become an “everything app”. With others also looking to become one-stop shops, is the West ready for super apps?
X received approval from Utah on January 12, making it the 15th US state to be given the green light for money transmission on the platform.
The company announced last week that it plans to launch peer-to-peer payments in 2024, “unlocking more user utility and new opportunities for commerce, and showcasing the power of living more of your life in one place”.
X “is the future state of unlimited interactivity — centred in audio, video, messaging, payments/banking — creating a global marketplace for ideas, goods, services, and opportunities”, according to chief executive Linda Yaccarino.
However, X is not alone in its ambitions to become a so-called “super app” — the likes of Revolut, Uber and Bolt are also preparing to expand their product offerings to turn into one-stop shops. They are looking to emulate the full-service apps that emerged in Asia a decade ago.
How super apps conquered Southeast Asia
Super apps have become ubiquitous in Asia — all-in-one mobile apps offering a wide range of features from payments and messaging to food delivery, ride-hailing and travel bookings.
The trend started with WeChat in China, which reached more than 1bn users in 2018, seven years after its launch, and Line, which has 95m users in Japan and 176m worldwide.
Their popularity has spread to Southeast Asia, where they have been gaining international attention for their rapid international expansions that are the envy of their Western counterparts.
“Financial super apps have rapidly gained prominence throughout Southeast Asia, providing new ways for people to manage their finances and digital assets through a single, comprehensive platform and it’s starting conversations worldwide,” Solo Ceesay, chief executive and co-founder of US social marketplace Calaxy told Vixio.
“The success of these super apps like Grab and Gojek has sparked curiosity about their potential success.”
The region is an example of digital leapfrogging, where parts of the world that did not benefit from traditional stages of technology development jump directly to the latest technologies. The lack of internet connectivity, traditional banking and consumer retail in many areas has led to people adopting mobile payment services.
Many consumers in Asia first accessed the internet through mobile platforms and multi-service apps. Technology companies typically started with a single service, like ride-hailing or mobile wallets, and quickly expanded their user bases by adding new features to their initial offerings.
The easing of Singapore’s banking regulations and strict, extended lockdowns in the region during the COVID-19 pandemic helped accelerate the use of super apps in the region, as consumers were forced to shop and conduct their business online. These apps made themselves part of users’ daily lives and created marketplaces to connect buyers with suppliers that may not previously have had an online presence.
The Singapore Economic Development Board (EDB) has forecast that the super app market in Southeast Asia will be worth US$23bn by 2025, up from US$4bn in 2020.
Young, well-paid and tech-savvy users
The success of Southeast Asia’s super apps is due in part to its unique demographics. The region is on pace to become the world’s fourth-largest economy by 2030. It has relatively high smartphone penetration and high disposable income, with 57 percent of its tech-savvy population under the age of 35.
Consumers in the region tend to be early adopters of new technologies, and yet with around 310m super app users, there is still room for growth as only one in three use more than three services within the apps. Around half of the 690m-strong population in Southeast Asia is unbanked, according to Fitch Ratings, creating the potential for further adoption of integrated financial services based on digital wallets.
“In Southeast Asia, the cultural landscape has played a crucial role in the triumph of financial super apps. The prevalence of mobile-first users, high smartphone penetration, and a tech-savvy population have been conducive to their impressive adoption,” Ceesay said.
“Users have embraced the convenience of having diverse financial services, including payments, banking, investment, cryptocurrencies, digital assets, and more all consolidated into one single app.”
“Major payment platforms with captive user bases are increasingly monetising by providing a broad range of financial services to a significant segment of the population who have never had access to them until now,” according to Colin Wu, head of technology capital (Asia) at Macquarie Capital Principal Finance.
“As an investor, we are increasingly looking downstream past platforms to start-ups using technology to deliver financial products, from wealth management to insurance to credit, including alternative credit solutions such as buy now, pay later."
Privacy versus convenience
Southeast Asia leads in the adoption of new technologies ahead of the US and Europe, according to research by Bain. That openness, and its favourable demographics, explain in part why the region has so readily adopted super apps while their emergence in Western countries is lagging.
Consumers in the US and Europe have access to mature banking and retail services, with entrenched credit and debit card use, providing less impetus for the uptake of mobile services through challenger banks, technology firms and other new providers.
Another consideration is that consumers in Asia tend to be more comfortable with large corporations owning their personal information than their Western counterparts.
A Pew Research survey found that 81 percent of Americans are concerned about how companies use their data, and 67 percent have little to no understanding about what companies are doing with their personal data. Some 77 percent have little or no trust in leaders of social media companies to publicly admit mistakes and take responsibility when they misuse or compromise users’ personal data. A similar number has little trust that social media platforms will not sell their personal information without consent.
“Replicating the scale of success of these super apps in the US and Europe comes with unique challenges,” Ceesay said. “These range from cultural differences in financial behaviour, variance in banking infrastructure, and differing preferences in financial services, to the general regulatory landscapes across regions. In Southeast Asia, regulatory environments have been more open, fostering innovation and allowing for rapid growth.”
In Europe, strong regulatory control limits the merger of the largest technology firms to protect competition for consumers. This can make it more challenging for companies to develop super apps through acquisitions, as Grab did by acquiring Uber’s ride-hailing and food-delivery assets in 2018.
The EU General Data Protection Regulation (GDPR) also makes it difficult for companies to aggregate consumers’ personal data in a single app.
“The US and European markets demand a meticulous approach to compliance and may require new financial super apps attempting to enter the market to navigate complex regulatory frameworks creating a tougher barrier to entry,” Ceesay said. “For existing tech giants on the verge of building super apps, antitrust laws obstruct the path to prevent monopolies from hindering competition.”
Are super apps set to take off in the West?
All that said, there are trends that could mean the time for super apps has arrived in Western countries.
EU and US data privacy laws, such as the Digital Services Act — which comes into effect in March — are making it harder for technology firms to sell their users’ data to third parties. This may prompt companies such as Google and Facebook to expand their app services to keep customer information within their own networks and profit from using it in new ways.
The scrutiny on the big tech companies by the EU and US governments could drive them to develop diversified services in-house, as mergers and acquisitions are increasingly likely to be rejected as anti-competitive.
Growing consumer demand may also provide an incentive for app providers to expand their offerings. Just as in Asia, younger demographics are more receptive to digital services and less wary of sharing their personal information with social media platforms.
A report by PYMNTS in collaboration with PayPal found that three in four consumers in Australia, Germany, the UK and the US were strongly in favour of super apps rather than dozens of individual apps. Further, 41 percent said they would increase their banking activities if they had access to a super app.
The average smartphone user now spends more time using more apps than ever before. Users have around 80 apps on their phones, on average, of which they use nine on a daily basis and 30 every month, statistics show. A super app would reduce the time spent switching between apps and help brands retain customers’ attention.
The big tech firms and challenger financial apps alike clearly see opportunities to capitalise on shifting consumer priorities.
The race is already on:
- The Facebook app incorporates payments, e-commerce, podcasts, photo and video sharing, dating and gaming as well as messaging.
- Uber now offers food and grocery delivery, car hire, train, coach, airline and hotel ticket booking, as well as bikes, ferries and scooters in the UK in addition to ride-hailing.
- Revolut features hotel bookings, travel insurance, subscriptions, lounge passes and e-commerce along with its mobile wallet, virtual cards, payments, foreign exchange, savings and investing services.
With Elon Musk’s broad ecosystem of companies, there is potential for the X app to integrate features from its artificial intelligence, connected cars and clean energy businesses.
One caveat for would-be super app developers is that 45 percent of the respondents to the PYMNTS survey were concerned about being hacked when using a super app, emphasising the importance of safeguarding user data.
“While the concept of financial super apps presents an exciting global opportunity, understanding and addressing cultural nuances and regulatory intricacies will be pivotal in determining their success in the US and Europe,” Ceesay said.
“The adaptability of these apps to local contexts and the ability of innovators to navigate regulatory landscapes will be crucial factors in determining their viability in these markets.”
