Will the Philippines soon have a super app of its own?

Written by || June 19 2019

There must be room in Asia for one more super app. Ride-hailing giants Grab and Go-Jek are going that route, determined to show investors that they're more than glorified high-tech taxi services. The Philippines' Yuchengco Group, a family-owned conglomerate with businesses ranging from banking and insurance to travel, healthcare and funeral services, is now throwing its hat into the super app ring, with a very different approach. Yuchengco intends to replicate its offline services online within a single app: It sounds like reverse O2O, in the sense that services which were once offline are about to go online.

Several factors are working in Yuchengco’s favor. Firstly, the Philippines has no super apps, at least not yet. The market is fragmented. Facebook Messenger, the top messaging app, doesn't yet offer any services besides chat. Nor do Viber or WhatsApp. There are many digital wallets, none with a commanding market share. There's certainly a potential market for an app that puts everything under one umbrella.

Secondly, unlike most of the digital-only platforms, Yuchengco has an established financial arm, Rizal Commercial Banking Corp, the Philippines 10th largest lender. Experience in the financial sector should help Yuchengco overcome some of the standard regulatory travails firms new to banking inevitably encounter. The company will benefit from its status as an incumbent and the fact that it's a known entity to regulators.

Thirdly, the Philippines is broadly encouraging the use of fintech to boost financial inclusion. It is among Asean's most fintech-friendly nations, and we wouldn't expect Yuchengco to encounter too much skepticism about its digital banking plans from the central bank. Indeed, Philippines has been among the first countries in Asia to license cryptocurrency firms and establish a nationwide digital retail payments system.

The influence of China's WeChat on Yuchengco's super-app ambitions is overt. Lito Villanueva, head of the conglomerate’s digital technology efforts, told Bloomberg in May: "It’s a WeChat model -- a one-stop shop with all the array of services you can offer." The company plans to launch the mobile app in the third quarter of the year and have 12 million active users in three years, he added.

We would add a caveat about replicating WeChat's model. The conditions that allowed WeChat to become ubiquitous in China don't exist outside of China. In particular, the Chinese government openly tries to cultivate national tech champions, even when its policies flout WTO rules. For instance, Beijing blocked foreign messaging apps from the China market, allowing WeChat to become indispensable to Chinese users just as China's smartphone boom took off. In 2013-14, after accumulating a massive user base, WeChat launched a fintech ecosystem. The only real competition was Alipay, which didn't have comparable ride hailing, chat or social media functions. 

In other markets, where regulators are more content to let market forces play a decisive role, firms will struggle to achieve the dominance that WeChat enjoys in China.