The Era of Super Apps

In the early years of this century, when malls were getting popular in India, there was palpable excitement in the way clothes, gaming parlours, groceries and restaurants came to be housed under one roof. Today, a similar disruption is in the making in the digital arena. This disruption that we are talking about is the emergence of the super app, a single mobile app that offers basic services like chat and payments, but also has a host of other third-party ‘mini-apps’ for e-commerce, food delivery, healthcare, etc. Not dissimilar to a physical mall that houses a variety of brands.

In many ways, the super app has become the Holy Grail that every company—from conglomerates like Tata and Reliance to fintech players like Paytm to even Big Tech firms such as Facebook and Amazon—is in the fray to own.

In India, super apps are still in a nascent stage, but across Asia, they’re a rage. China’s WeChat, for example, started out as a messaging app, but today it can be used for anything from finding a date to getting a loan and more. It offers more than a million different services through a network of mini apps developed by businesses within WeChat. Singapore’s Grab, Indonesia’s GoTo, Vietnam’s Zalo and South Korea’s Kakao also work on the same principle.

Experts believe that India, too, is about to witness a boom over the next decade. But is there a criterion for an app with multiple services to qualify as a super app? “There are no established benchmarks. However, usually super apps have multiple offerings ranging from 25 to 100+ spread over financial services, healthcare, media & entertainment, e-commerce, education, travel, leisure, etc., to cover a majority of fin-life needs of consumers,” says Sachin Seth, Digital and Fintech Leader, EY. “They also aspire to have significantly high ratio of daily active users (DAUs)/monthly active users (MAUs) above the average of 10-12 per cent for successful B2C niche services apps.”

WeChat has around 1 billion MAUs. By that standard, apps like WhatsApp, with upwards of 200 million users in India and State Bank of India’s (SBI) YONO, which has more than 37.9 million users, are well on their way to becoming super apps.

Banking Takes Lead

Globally, most successful super apps have been built around core services like social messaging, digital payments, food tech, and so on. In India, banking has taken the lead. Five years ago, SBI came up with an app YONO—an acronym for ‘You Only Need One’. In the last three years, YONO has notched up impressive numbers: 37 million registrations, Rs 21,000 crore-plus loans, 77,671-plus daily cardless transactions and leads for Rs 10,000 crore of home and car loans. It also became the first digital bank in the world to break even in less than two years. “The journey of YONO started because the bank wanted to attract the younger generation,” says Rajnish Kumar, former SBI Chairman. “The idea was [that] there’s clutter on your mobile phone. So, with one app you can take care of all your financial and shopping needs. The key difference between China and India is that in China, the banks did not come forward. It was done by the likes of Alibaba and Tencent, whereas in India, the banks themselves are building their own super apps.”

In the financial sector, ICICI Bank’s iMobile Pay, a mobile banking app that provides payments and banking services to customers of any bank, HDFC Bank’s PayZapp, which offers digital payment and purchase solutions, Kotak Mahindra Bank’s KayMall, which is a one-stop online mall for customers’ shopping and travel needs, are some of the examples of banks spearheading India’s super app journey. Other UPI-based issuers, too, are fast diversifying into full-fledged financial services like lending, and trends like ‘buy now, pay later’ are offshoots of that. Examples include Paytm, PhonePe, MobiKwik, Google Pay, BharatPe, Pine Labs, RazorPay and CRED. Experts believe that financial services were successful because they already had a platform that was solving the core need of a large customer base.

Tough Competition

The situation is also rapidly evolving and the nascent super app ecosystem is already witnessing the offshoots of what could be tough competition ahead. Mukesh Ambani-owned Reliance Industries’ JioMart is set to get into the super app business in a bid to outmanoeuvre rivals like Tata, which has companies across hospitality, jewellery, fashion, airlines, etc. Tata UniStore, which owns e-marketplace Tata Cliq, has received Rs 102 crore in two tranches as part of its plans to raise Rs 1,000 crore, as per the company’s regulatory filings. The Tatas have pumped in Rs 5,025 crore into its e-commerce platform, Tata Digital, as the conglomerate plans to fulfil its super app ambitions. The company also has a controlling stake in e-grocer bigbasket and digital health company 1mg, and has also invested $75 million in fitness company CureFit. Brands like bigbasket, 1mg, Taj Hotels, Croma and AirAsia are already available on what is being called the company’s super app, the TataNeu.

Apart from conglomerates, fintech giant Paytm isn’t far behind. It aims to build a platform that can provide different products and services on a single app. With almost 700 developers on its mini app store, Paytm says it is looking to become a super app by the end of the year and hopes to have 2,000-3,000 developers on board. According to Paytm’s DRHP, among consumers who joined the Paytm app in FY17, the GMV by consumers transacting for three or more use cases in any year increased 6.8x by FY20.

Flipkart-backed PhonePe, too, is gearing up to acquire Indus OS, which has built Indus App Bazaar. Through this acquisition, it plans to integrate 400,000 localised Indian apps from Indus App Bazaar to its PhonePe Switch, the mini-app store it launched in 2018. Today, PhonePe can already send and receive money, make utility payments, and make investments. It also claims to be accessible at 20 million merchant outlets across 12,000 towns and 4,000 taluks.

“I will bet on Amazon and PhonePe in the long term. That’s because already the largest number of transactions go through them. Some conglomerates have also acquired companies, but if they’re able to break that brand perception and crack that omni-channel puzzle, then they’ll become bigger than the big tech players,” says an industry expert on the condition of anonymity.

Smartphones as Growth Drivers

According to a report jointly released by Indian Cellular and Electronics Association and consulting firm KPMG, India’s smartphone base is estimated to reach 820 million this year. Experts are banking on this massive growth when it comes to the adoption of super apps in the country. Since smartphones have limited storage and memory, super apps are best suited to mobile-first markets like India since they require relatively less storage and memory, as opposed to having multiple apps for different needs.

“Whether financial or non-financial, the use of mobile banking is growing at a fast pace. Today, the number of mobile and internet transactions is neck and neck,” says SBI’s Kumar. And companies realise this and, hence, are banking on the country’s fastest-growing smartphone user base. A report by BofA Securities argues that big tech firms like WhatsApp, with a large user base, are best placed to become super apps, while an entity like Tata is yet to have a core use case. “The offering [super app] will also be seen from top fintech players, while WhatsApp’s positioning makes it best suited to succeed as a super app. Over time, India has the potential to have at least three or four super apps coming from conglomerates such as Reliance Industries and the Tata group, which have ambitions to become large tech-focussed ecosystems,” the report says. However, the report also adds that Indian companies are still sometime away, both from customer value proposition as well as providing high frequency use cases.

Growth Sectors

“However, things are dynamically evolving owing to the pandemic, and most of the products and services have significant potential to become Do-It-Yourself (DIY) through super apps.” says Seth. “While financial services will remain the strongest layer of the super app story, sectors like health & wellness, food, travel, learning & education, e-commerce, entertainment, MSMEs, local merchants and rural services will witness tremendous growth.”

As seen in other Asian markets, India, too is likely to end up with one or two players dominating the space. However, some industries will take precedence when it comes to initial adoption and penetration of these apps. “Embedded finance—one of the foremost themes of India’s fintech story going forward—is working very successfully with further potential to unlock vast growth opportunities for specific target segments, such as Gen Z, millennials, or small business niches,” says Seth. “Its adoption is gradually picking up in scenarios where frequency of purchase is low and need for physical touch points is high. For instance, life insurance may take longer to take off as compared to lending, payments or bite-sized general insurance because it is a push product and requires certain amount of phygital connect with buyers.”

Experts say that industries that either help people manage finances, livelihoods, or become a frequent touch point in their overall lifestyle, are expected to see growth going forward. “The time for super apps is now. Currently, there is a significant play of Big Tech and e-commerce companies in the space, and their success rate has been very high because of their ability to influence consumer behaviour across channels and [them] investing heavily in customer acquisition and retention without worrying about profitability. However, large conglomerates with diversified B2C businesses are also entering this space and soon we will have multiple options available to consumers,” says Seth. “Sectors like health, wellness, financial services and rural services are expected to see growth.”

The Future

‘Collaborate or die’ is basically the mantra that the apps of tomorrow will follow. But is India ready for the disruption yet? “In the past 10 years, the world has changed so much. Nobody can predict what will happen in the next 10 years. Going forward, start-ups have an edge because legacy institutions and their systems have become old-fashioned. That’s why you have so many start-ups in fintech coming up because they don’t carry the baggage,” says Kumar. He adds that while legacy firms have their own advantages in terms of scale and customer trust, start-ups will take the lead in terms of their capability to deliver innovative solutions.

But as companies gear up to become super apps, there are challenges that they need to first tackle. Experts point out that as super apps become popular in India, addressing regulatory concerns around data privacy and building a robust infrastructure will be key. “There will be new challenges coming up with the changing times. The regulation needs to change accordingly. Issues around crypto, data privacy bill, etc., need to be tackled with the right approach,” says Kumar.

Cryptocurrency is still a grey area as far as India’s regulatory framework is concerned. Some countries like the US are already on the verge of integrating crypto and payments apps, to make transacting more convenient for customers, and experts believe that India, in this domain, has a long way to go. The key, they explain, is to deliver financial services in a personalised manner. On one hand, crypto payments would go a long way in democratising finance, in the sense that people with no credit history, who struggle to get loans or get credit cards, will get better access to financial services. But on the other hand, there are issues related to data privacy, illegal activities, hacking and cybercrime that could lead to a bigger menace going forward.

“Challenges related to data privacy continue to prevail in terms of data being collected and used across industries and platforms. The guidelines and regulations as well as consumers’ sensitivity regarding their data vary for different purposes. Cross-leveraging data of consumers’ preferences and transactions, this will be one of the biggest challenges for super app providers,” Seth says. According to him, another cause of caution could be around customer service and customer complaints. “Super apps are providing multiple services. However, not all of them are provided by the same manufacturer or producer; most of the times it’s from third parties. Then the question arises [as to] who’s responsible for service delivery deficiency issues and how super apps will provide a seamless servicing platform. It will be interesting to see how this question will be addressed,” he adds.

Experts also warn that smaller and niche companies, who struggle to find relevant partnerships and are not able to create enough critical mass, will find it difficult to survive. “Everybody today has understood that the game is not about playing it solo. Also, it is not just about getting new partnerships. The success mantra is to develop sustainable long-term business partnerships. Either someone already has consumers and they would like services to be offered by someone else on their platform; at the same time, someone else already has a proven bouquet of services and products to offer, but needs a platform to find consumers. The key is to create compelling value propositions for partners and consumers,” Seth explains.

@PLidhoo