May 15 2024

The end of the super app dream

For several years, there was much hype and excitement about copying China's immensely successful "super app" model to the rest of Asia and the world. China’s super apps, WeChat and Alipay, brought together products and services in a seamless platform, offering everything from messaging and social media to ride-hailing, food delivery, and financial services.

The model had other platforms and VCs salivating over the data and cross-selling possibilities. “We’re a super-app” became a rallying cry with the promise that by bundling a wide range of useful services into a single app, companies in other regions could achieve similar market dominance and stickiness with consumers—or at least increase their valuation…

However, the enthusiasm around super apps expanding globally seems to have died down considerably as of late. While some companies are still pursuing the super app playbook in markets like Latin America and Africa, the hype cycle appears to have shifted to other hot trends like embedded finance.

Lessons learned

There are a few different lessons about the business models to learn here. Firstly, WeChat and Alipay were successful because of market dynamics. China had unique conditions, including mobile-first consumer behavior, a lack of legacy infrastructure, and greenfield opportunities to build consumer trust. It is hard to imagine in today's hyper digitized China, but 20 years ago, cash dominated payments in the country. To be sure, there were bank and credit cards available, but foreign credit cards often did not work outside of five-star hotels and large department stores, while local credit cards were difficult for non-Chinese to obtain. For these reasons, it was often easiest just to use cash.  

Alipay and Tenpay (WeChat Pay's predecessor) focused on making online payments easier and removing that point of friction, which they then repeated for offline payments, wealth management, etc. If online payments in China were easy, as they were in a place like the US, where card and card acceptance online are high, it never would have happened. If the market dynamics are different, the model doesn’t work.

Secondly, there is an inherent tension in bundling too much. Combining a dozen different services into one app creates meaningful challenges around user experience, brand, regulation, organizational structure, etc. Companies may realize the most straightforward path forward is doing a few things well rather than being a jack of all trades.

Thirdly, the financial industry is fickle. New trends constantly usurp the industry narrative; the latest is embedded finance. Embedded finance presents the potential of seamlessly integrating financial services into all sorts of consumer apps and experiences. In a sense, rather than a single do-everything super app, the future may be all our apps having built-in payments, lending, insurance, and so on. Companies are increasingly focused on these embedded finance opportunities.

Finally, locally tailored solutions. Consumers gravitate to the best solutions for their specific needs and cultural context. What has worked in China or Indonesia won't necessarily translate to Nigeria, Brazil, or the US. Homegrown players deeply attuned to local conditions likely have an advantage over copy-and-paste super app imports.

The super app is dead, long live the super app

To be clear, we are not pronouncing the super app model dead, though in Asia outside of China and Korea - where Kakao is enormously successful - it may not survive. The fundamental premise of making consumers' lives more convenient by bundling many services together remains attractive, but the reality is that building a super app is extremely difficult. It requires a rare combination of local market insight, long-term focus, deep pockets, and impeccable execution across many domains simultaneously.

The unbridled enthusiasm of a few years ago has given way to a more sober recognition of these challenges. The dream of super apps conquering the globe was perhaps always overblown - the future is likely to be more nuanced, with a range of approaches succeeding in different markets based on their specific dynamics and needs. Super apps will undoubtedly play a role but are unlikely to be the universal endgame some had prophesied.