Is the Rise of the “Super-app” an Opportunity or Threat for Banks?

In recent years, the number of mobile apps has multiplied exponentially, and now, there’s an app for everything from ordering a taxi to making an online transaction. Effectively, mobile apps have transformed the way we live and conduct our daily business.

Among the latest developments in mobile apps, the “super-app” has emerged that combines a plethora of smaller apps within its framework. According to a KPMG report, super-apps or conglomerated apps are having a disruptive influence on the banking and financial sector. Among the popular ones in the financial domain, WeChat and Paytm are prime examples of successful super-apps that offer everything from news/updates and social media to financial and retail services from third-party providers.

How will these super-apps and the several upcoming ones impact the banking and financial services sector? Let us have a clear understanding of the “super-app” phenomenon to clear the clouds. First, let’s see what exactly a super-app is and how it works!

What is a Super-app?

As the name suggests, a super-app offers a one-stop solution for mobile users to perform many tasks. Effectively, this is an “umbrella” app that consists of a complete ecosystem of online services such as financial services, social media access, eCommerce, and so on.

For instance, the Indian super-app Paytm started as an e-wallet and now offers a gamut of additional services such as mobile payments, eCommerce, insurance, movie tickets, digital gold, and so on.

Another example is that of the Gojek super-app which is an Indonesia-based on-demand multi-service platform. The company started as a call center for establishing a connection between customers and courier delivery services. Now, the company’s customers can order their food, book a massage appointment, go shopping, and even make their digital payments on the same app.

Next, let us see how super-apps are disrupting the traditional banking system.

How Super-Apps are Disrupting Traditional Banking?

Most banks rely on providing their customers with banking apps for facilitating online services such as daily financial transactions, viewing account statements, and viewing investment-related products. However, customers who do not want all the services from the same bank/financial institution have to install and use multiple apps for different purposes.

Looking at the latest industry statistics, every smartphone user installs an average of 80 apps, while 25% of the installed apps are used only for the first time. Multiple banking apps mean that users have to manage with many login credentials and payment options, which turn out to be cumbersome.

This is where super-apps excel over “traditional” mobile apps as they enable customers to use only one app for making online payments, viewing their credit card statements, applying for a loan, and even performing non-financial activities. While the super-app platform itself doesn’t offer any of those services, it simply facilitates them for the convenience of the customer, who no longer needs to visit another website or install another mobile app.

Here are a few pointers on how super-apps provide an enhanced experience to their customers:

• As more users adopt the convenience of mobile banking, super-apps are providing the perfect platform for all their financial needs, including bill payments and online sales.
• Hyper-personalization in super-apps enables a great customer experience, where customer loyalty is gradually shifting to the super-app itself.
• With more customer touchpoints, thanks to multiple services, super-apps have more customer-specific data than banks. With data analytics tools, this customer data is now a “goldmine” for better decision-making and designing future services for banking customers.
• Since super-apps are creating a huge shift in customer loyalty, they also pose a risk of gaining leverage over the financial service provider in terms of service listing and payments.

Effectively, super-apps are a natural progression for the “traditional” mobile app. How do banks respond to the challenge posed by super-apps? Let’s discuss next.

How does the banking sector learn to adjust and coexist with super-apps?

The banking sector needs to learn how to adjust and coexist with the super-apps. Here’s how they can positively respond to the rise of super-apps:

• Create and rely on Partner ecosystems

In the modern banking industry landscape, banks and financial institutions need to establish partner relations with third-party financial service providers for attaining a long-term market value. An effective partner ecosystem can provide banks access to new banking products and services and cater to a larger customer base. Banking apps can make use of APIs to integrate with third-party apps and products, to offer more services to their clients.

• Leverage customer data

The future of banking will be driven by customer data. Banks must look to invest their time and resources into building user-centric solutions. Banks have to connect with third-party apps and products, so they can build and improve data flow by collecting more data through increased customer touchpoints. They can then use data analytics to understand the customer journey, customer behavior, and patterns, and create the best customer experiences. They can also utilize this data for designing financial products and schemes based on true customer interest.

•  Adopt Open Data

As super-apps rely on the effective use of the free flow of information, banks can also compete with them by adopting APIs and Open Data Architecture or ODAs. Further, banks need to focus their efforts on data management with the help of technologies such as data analytics, AI, and machine learning. This can help in unlocking the true value of the collected data and improve user experiences.

Conclusion

Many banks have already partnered up with super-apps for increasing their customer base, while others are waiting for the right time. On the other hand, banks such as DBS and Tinkoff have started to create their API ecosystem to implement super-apps. In any case, with the rise of super-apps, banks have to sway from the traditional approach where customers were opting for their services only because of trust and convenience.

The market space is changing, and customers’ trust is also shifting from the service provider towards the service facilitator. With a more data-driven approach, banks have the opportunity to be more open towards customer acquisition and building partner relationships. Super-apps are transforming the banking sector by creating positive customer experiences and in this endeavor, customer consolidation and a data-driven approach are their two main weapons. Verinite can help you in learning and unlocking the true potential of your data. Get in touch with us!