While much has been written about the rise in fintech innovation, it’s the steps taken by at-scale commerce platforms (Square’s acquisition of Afterpay, PayPal’s recent acquisition spree, and Apple’s continued foray into financial services) that frame a broader trend. This expansion echoes the rise of mega players in Asia and foreshadows the rise of similar “super apps” in the United States.
Market Behavior Points To Consolidation
Square, PayPal, and Apple aren’t the only players bundling financial services and broader commerce functionality. Shopify, Walmart, and Amazon are also strategically expanding their array of financial services. Recent acquisitions and product announcements by Shopify (Affirm, ShopPay), Amazon (Affirm), and Walmart (“Hazel”) reinforce a push to integrate a broad range of functionalities into a coherent commerce experience that extends across product discovery, purchasing and financing, customer loyalty, and engagement. Embedded financial services are a powerful driver of retail growth and present a natural opportunity for expansion.
“Customers today expect experiences that integrate the information and capabilities needed to complete their shopping journeys in a seamless manner,” said Daniel Eckert, a Commerce Ventures senior advisor and the former leader of Walmart Services. “Financial services are no different, and fintech enablement is now making truly embedded offerings a reality. Several platforms are taking note, and are delivering their financial offerings in ways that effortlessly surface to deliver value precisely at the point of need for customers.”
Commerce Platforms Expand Financial Services
With increased product offerings and access to both merchants and consumers, many of these players are laying the groundwork required to be a “super app.”
Players that have historically operated in financial services (e.g., PayPal, Square) with high consumer engagement are expanding and bundling additional commerce functionality into their offerings. Similarly, players that have operated as leading commerce platforms (e.g., Amazon, Shopify, Walmart) are looking to more tightly integrate financial services as part of a broader experience.
Fundamentally, “super apps” must enable consumers to natively discover, engage, pay and manage day-to-day activities.
For merchants, they must provide a broad and self-contained ecosystem of engagement that has sufficient consumer demand to make participation worthwhile.
The Jump to “Super App”
What qualifies as a “super app?” We define it as an app that unites an ecosystem of related services under one roof with fully integrated financial infrastructure to engage these services.
Asian markets have trailblazed this category: Alipay and WeChat Pay are prime examples of successful “super apps.” Platforms in these geographies provide use cases across commerce (e.g., discovery and purchasing goods and services) as well as financial services (e.g., payment, financing, transfers, etc.). A consumer on Singapore’s Grab can not only order food delivery but can request the needed amount to split the service with friends and pay that outstanding amount — all without leaving one app.
Requirements For “Super App” Status
In order to succeed, “super app” competitors must meet a handful of conditions to successfully scale and consistently engage consumers:
- Scale: Dominant scale across consumers both AND merchants
- Behavior: Highly habitual and interactive behavior within the app
- Functionality: Platform must natively incorporate commerce and payments
Market Position of Competitors
In the U.S. market, no single player has achieved “super app” status but there are several contenders that are well-positioned. Below we’ve visualized the top six contenders with their respective strengths and weaknesses.
What is worth noting about all of the current players is that none are new to financial services; most of them initiated payments as an entry product. Today these competitors offer products ranging from credit to deposits and lending.
US contenders will have to not only meet the conditions previously mentioned but develop superior user experiences to overcome American consumers’ lower e-commerce adoption rates.
Who Will Win the United States
Using this framework to evaluate current competitors we believe Apple and PayPal are best positioned to crack the “super app” code in the United States.
Apple is uniquely advantaged to influence consumer behavior given its history of disruptive innovation in technology at large, most recently in consumer fintech. While Apple is undoubtedly successful in consumer adoption of new technologies, its track record of financial services has not provided deeply meaningful value for merchants. Today, Apple has no payments solution in an e-commerce context and its latest BNPL launch also fails to be visible in the checkout path.
Apple’s ability to succeed as a “super app” contender will depend on its ability to develop a richer infrastructure that increases transaction volume or optimizes payment flows for merchants.
Paypal (unlike Apple) is compatible with users across operating systems, making its addressable market larger. The Company also leverages impressive financial services infrastructure and embedded payment flows across its many offerings. Despite their credibility amongst merchants, PayPal faces challenges when it comes to moving into habitual commerce-oriented activities.
PayPal will need to double down on developing lifestyle-oriented native offerings (e.g., entertainment, food delivery, shopping) that will cement habitual consumer usage.
“Apple and Paypal are approaching the “super app” opportunity with different advantages, so getting to scale will look different for each,” said Barry Rodrigues, a Commerce Ventures senior advisor and former CEO of Barclay’s North America. “Apple will have to demonstrate meaningful value to merchants to secure their engagement in a seamless commerce experience and merchants will need to consider that Apple solutions only cater to iOS users. On the other side, PayPal has to convince users of its disparate applications to interact with them as a broader contiguous platform of value, rather than a series of discreet, transaction-based use cases.”
Asian precursors indicate that two players are able to thrive concurrently in this space, however, both of these forerunners will need to build habitual and interactive engagement in order to succeed. We’ll be watching for acquisitions, partnerships, product announcements, and key hires that signal an intent by these players to expand, scale, and broaden their value proposition to become the breakout lead.