The (not so great?) American Super App-ening

Bitcoin ETF Nears Approval, Coinbase Wants 'Special' Regulator, Money2020 Preview

Hey all, Jason here.

Wow, end of October already — and that means Money20/20 in Vegas (certainly better weather than the event here in Amsterdam!) is just around the corner. I’m planning on being in Vegas from Saturday, 10/23, through Wednesday, 10/27 — if you’ll be at the event and want to meetup, let me know!

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The (not so great) American Super App-ening

If you work in the consumer tech space the US, the recent(ish) trend of the so-called “super app” has become unavoidable. Particularly within fintech, as companies have sought to diversify from a single wedge feature into broader business models, several have adopted the term and begun describing themselves as “financial super apps.” What is a “financial super app” (and does the term even make sense)?

But First, Where Did this “Super App” Trend Come From?

While the term has only recently become trendy in the American market, especially among fintechs, the concept originates from the East; specifically, China and Southeast Asia.

The timing and growth of the internet in these markets came later than in the US, happened more rapidly, and, for many consumers, was (is) experienced as a mobile-first (or mobile-only) phenomenon. Unlike American consumers (at least, of my generation), “the internet” is near-synonymous with the mobile phone — laying the foundation for an app-first instead of web-first ecosystem.

Like most of the world, Android is the dominant phone OS in Asia; it comprises about 80% of the market in China vs. iPhone’s 20%. While the dominant super apps had different product origins (payments, chat, taxi, delivery, etc.), they evolved to offer an OS-within-an-OS.

This is true in a quite literal sense — WeChat, for instance, supports “mini programs” that are analogous to standalone Android/iOS apps; retailer JD.com offers a mini program within WeChat, as do social selling app Pinduoduo, Tesla, and countless others. In 2019, WeChat mini programs saw an astounding 746 million monthly active users

Because they often served a consumer base new to the internet, “cross selling” these users into new services faced low barriers — it was much less likely that a super app would have to compete with and displace another app or service the user was already using. The greenfield opportunity was much larger.

WeChat, Alipay, Grab, Gojek — in a sense, these applications are the internet for many users — not dissimilar to AOL in the early days of the internet in the US.

Whether AOL in the ‘90s or these super apps today, these services abstract complexity by aggregating the most popular products and services in a single place.

Enter the US “Financial Super App”

In the past year or so, the “super app” term started popping up with increasing frequency in the US — often with the modifier “financial” attached to it.

Unifimoney a, uh, financial super app (I guess?), boldly proclaimed that “America’s financial super app moment has arrived.” PayPal, a decidedly web 1.0 payments service, has rolled out features like BNPL and savings accounts and began describing itself as a financial super app.

The list of self-described financial super apps goes on, including BNPL-pioneer Affirm, trading app M1 Finance (which even trademarked the term), and challenger banking app Revolut.

Beyond these companies explicitly pursuing this strategy (or branding, at least), Square’s Cash App, Robinhood, and even Coinbase are arguably executing similar approaches.

The common thread here? Most of these companies started with a single wedge product that was an order of magnitude better than alternatives at the time: Paypal (online payments in web 1.0); Cash App (P2P payments); Robinhood (commission-free trading); Coinbase (user-friendly crypto); Affirm (BNPL/POS lending); and so on.

The problem these companies are trying to solve is real enough: users’ “financial lives” are split and siloed across discrete apps for spending, borrowing, payments, investing (fiat), investing (crypto) — from the company’s perspective, expanding into a financial super app can “solve” this issue for user.

The problem? Many of those expansion products and features are undifferentiated commodities that don’t give users much reason to switch from an existing provider.

The API-ization of everything has made it simpler, faster, and cheaper for apps to add features, but, because many are using the same set of underlying service providers, the functionality ends up looking remarkably similar from app to app.

Further, most financial services apps take a walled garden approach: if I’m a user of Robinhood or Coinbase for stock or crypto trading, I might love them for that core functionality, but prefer to keep my Unifimoney spending account/debit card or find it to be too much trouble to switch banking functions from my old Chase account.

The technical structure and business models of financial services apps (and state of open banking/open finance in the US) generally discourage aggregation of multiple companies’ products into a single app, with the notable exception of at the OS level — Apple Wallet / Pay and Google Pay, which are semi-open ecosystems.

Why Finance-First Apps Are Unlikely to Become “Super”

It’s rather unlikely that a US financial app — super or otherwise — could develop into a super app comprising as many functions as Alipay, WeChat, Gojek, etc. 

Can you imagine opening your phone and using Revolut to order a pizza? Thumbing through Paypal for a taxi? Buying a movie ticket in Coinbase

Consumers don’t want to “borrow money” or do a “peer to peer” payment. They’re not “adopting fintech.” The financial transactions — moving money, storing money, borrowing money — are secondary; they facilitate some other goal or outcome — splitting a dinner check, buying a pair of shoes, financing the purchase of a car. 

This is the ultimate thesis and promise of those other hot 2021 fintech trends: embedded finance, fintech infrastructure, and Banking-as-a-Service

Instead of banking apps becoming ‘super’ and aggregating functionality of other apps, the trend is likely to (indeed, already is) move in the opposite direction, with the financial function (move, store, borrow) a user needs being embedded and appearing contextually in another (non-financial) app (or part of the OS, website, etc.)

The explosion of BNPL is just one example of this; the financial services companies that understand and successfully execute on this strategy will be well positioned to capture market share and grow, while ‘financial super apps’ hiding behind walled gardens (whether JPMorgan Chase or Robinhood) will find themselves in a defensive position of trying to retain, instead of grow, their user bases.

If Finance Apps Aren’t Super, What Could Be?

OK, if financial services apps aren’t well positioned to form the base of an Asian-style super app, are any US companies in a position to try?

Google: the Google ecosystem, including Android, should position the company as a strong candidate to serve the aggregator or gateway function of a super app. After all, aggregating (and monetizing) information is what Google does best. But the company has consistently come up short and isn’t a credible threat in any of the core areas of super apps: mobility/delivery, financial services, ecommerce, or messaging. Its recent stumbles with its reboot of Google Pay and decision to kill Plex bank accounts implicitly acknowledge this.

Facebook (+ Messenger, Instagram, WhatsApp): Facebook lacks its own operating system and hardware like Google, but, across its family of products, has unprecedented scale. Facebook’s position outside of the US and especially in developing countries, in which, for many users, Facebook is the internet, is undeniably strong. But I would argue Facebook’s prospects of aggregating super app-like functionality in the US are considerably dimmer. WhatsApp is much less commonly used in the US. Facebook itself plateaued in popularity in the US long ago, and even Instagram is losing appeal with younger generations, who are gravitating to less commercially saturated platforms. The company’s attempts to make inroads in payments/crypto (Diem? Libra? Calibra? Novi? Huh?) have met regulatory resistance and seen limited success. Ultimately, Facebook’s customers are advertisers, not users, which makes it difficult if not impossible to credibly develop super app-like offerings.

Amazon: without using the term itself, Amazon may have the most credible claim to resembling a super app. The ecomm behemoth has (mostly successfully) expanded into content, hardware (Kindle, Echo, Fire), pharmacy, grocery (Amazon Fresh, Whole Foods), and built a sophisticated logistics network. Amazon has dipped its toe in financial services, mostly through partnerships (Chase, Affirm, Goldman Sachs), but a much rumored Amazon checking account has never come to fruition. Analysis suggests upwards of 82% of American households have an Amazon Prime membership — creating not only predictable, recurring revenue for Amazon but a stickiness and incentive for customers to look there first. 

Apple: in a sense, Apple (ok, and Google too) already are the super apps. They provide the platforms on which all of these other businesses and their apps operate — and collect a tax (from in-app payments) for that role. And Apple, through iMessage and FaceTime, control communications in a way that Google does not. This is a position and business model that has proven hugely profitable for Apple (and attracted its share of lawsuits and antitrust scrutiny). And while Apple has sought to expand its relationship with its users, this is most often in a ‘platform’ role as facilitator, taking a small cut (eg, 0.15% on Apple Pay transactions). I find it difficult to imagine Apple directly getting into super app business lines like ride hailing or food delivery.

Walmart: continually feeling the heat from Amazon, Walmart is also feverishly working to develop offerings that keep customers within its ecosystem. Walmart’s large stores offer a wide variety of household staples including packaged goods, grocery, and pharmacy. It has beefed up its ecommerce and delivery capabilities, especially as the pandemic has unfolded. And while Walmart has long offered some financial services in store (check cashing, money orders, etc.) and through a branding deal with Green Dot (Walmart MoneyCard), the efforts have had mixed success and are a rounding error on Walmart’s bottom line. An effort to build its own “fintech startup,” for which it recruited two senior execs from Goldman Sachs’ Marcus unit, still lacks a clear plan, with possibilities including building a payment app (good luck winning market share from Venmo or Cash App) or acquiring a neobank.

Does the US Market Need a Super App?

The internet and globalized economy are great. A technology or business model that emerges in one market can be quickly ported to another. But for such an approach to be successful, the business model and product need to be adapted to meet local market differences and needs.

In the American market, the “super app” model is a solution in search of a problem. Most attempts at replicating it (“financial” or otherwise) result in what had been a best-in-class app, if limited in scope, globbing on additional, undifferentiated features that are unlikely to be used by most consumers.

Further, consumer and political sentiment have begun to turn against the Big Tech companies most likely to successfully execute a super app strategy. Companies that once promised to “connect the world” or not to “be evil” are now not unlikely to be perceived as exploiting their workforce, harming their users, or enabling the spread of misinformation. The heightened skepticism and scrutiny that goes along with this makes every incremental feature or product one of these companies want to launch an uphill battle.

Crypto Roundup: Bitcoin ETF Closer to Approval, Coinbase Wants ‘Special’ Regulator as BOE Flags Potential for Systemic Risk, Jamie Dimon Said What?

Much like many in “banking” kept their head in the sand, ignoring the threats (and opportunities!) “fintech” posed to their business, so too do many in “TradFi” (did I do that right?) continue to ignore the threats and opportunities of crypto. That’s getting increasingly hard to do.

Bitcoin ETF Nears Approval

In the latest sign of institutional interest and regulatory… tolerance? a Bitcoin ETF (though comprised of Bitcoin futures, not “physical” Bitcoin) is likely to begin trading next week. The cryptocurrency jumped to above $60,000 on the news, though as Bloomberg’s Katherine Greifeld points out, such an ETF won’t necessarily unlock a new flood of demand for Bitcoin:

“Given the ease of access to cryptocurrency markets relative to previous years, it’s unclear that a Bitcoin ETF launch would spark a flood of demand, according to Juthica Chou, head of over-the-counter options trading at Kraken Digital Asset Exchange. Individuals can already buy and sell digital assets on crypto exchanges worldwide and through more retail-oriented platforms such as PayPal and Square. Meanwhile, institutional investors have been able to gain crypto exposure through vehicles such as the Grayscale Bitcoin Trust -- though plagued by persistent discounts -- for years.”

Bank of England Warns Crypto Could Pose “Systemic” Risk

It’s hard to ignore when central bankers start throwing around the term “systemic risk.” It’s usually a sign they want to regulate away your margins. In an astonishingly short span of time, regulators and central bankers have gone from ignoring crypto as a fringe hobby that was too small to matter to suggesting crypto could take down the global economy in a 2008-style implosion. Per Bloomberg:

Crypto assets are now worth $2.3 trillion, about 200% more than at the start of the year. While that’s still a small part of the $250 trillion global financial system, it’s about twice the size of the $1.2 trillion sub-prime real estate debt market in 2008.

“You don’t have to account for a large proportion of the financial sector to trigger financial stability problems,” BOE Deputy Governor Jon Cunliffe said in a speech on Wednesday. “When something in the financial system is growing very fast, and growing in largely unregulated space, financial stability authorities have to sit up and take notice.”

Coinbase Wants a “Special” Regulator

Coinbase, which has taken to Twitter to aggressively criticize the SEC and other regulators for a lack of clarity on crypto policy (fair!), is planning to release a policy proposal that would call for a special regulator for digital assets. According to the Wall Street Journal:

“The company’s policy plan says a single regulator would eliminate the need for piecemeal oversight by a multitude of federal and state agencies that crypto firms also have to deal with. A private, industry-funded entity—overseen by the stand-alone federal regulator—would monitor exchanges and dealers for signs of manipulation or fraud, the Coinbase document says.”

I mean, welcome to banking? The pain of multiple, overlapping, and sometimes conflicting regulators is the unfortunate state of reality not just for non-bank fintechs but for fully licensed banks and broker-dealers as well.

Carving out crypto, err, digital assets and giving it a “special” regulatory regime reads like an attempt to preserve its current regulatory arbitrage (and margins).

Oh, And Jamie Dimon Thinks Bitcoin Is “Worthless” (but clients get what clients want)

I’ll just quote CNBC on this one:

Jamie Dimon, JPMorgan Chase chairman and CEO, isn’t a fan of bitcoin, the largest cryptocurrency by market value.

“I personally think that bitcoin is worthless,” Dimon said during an Institute of International Finance event on Monday, CNBC Pro reported.

But, “I don’t want to be a spokesperson — I don’t care. It makes no difference to me,” he said. “Our clients are adults. They disagree. That’s what makes markets. So, if they want to have access to buy yourself bitcoin, we can’t custody it but we can give them legitimate, as clean as possible, access.”

Event Preview with Money20/20’s Chief Strategy & Growth Officer, Scarlett Sieber

It feels like I was JUST at Money20/20 (oh wait, I was!)

In advance of next week’s confab in Vegas, I had the chance to sit down with the Chief Strategy and Growth Officer of Money20/20, Scarlett Sieber, to talk about what it has been like organizing an event this big during COVID, how fintech has changed, and the industry trends she’s most (and least) excited about.

What follows is lightly edited and condensed version of our conversation.

Jason: Organizing a conference with the ongoing pandemic can't have been easy. What was the most challenging part? Surprising?

Scarlett: Where to begin with this question! So many answers.

I would say one of the most challenging parts of this was what we successfully pulled off in Europe — creating a safe environment where connections were still as spontaneous as ever, and where the industry could finally come together after all this time.

It was quite a piece of work but we got it over the line and were able to produce an incredible show that we (and our delegates and sponsors) were very proud of! It’s important for us to demonstrate to our ecosystem that we’re putting our all into this for the 6K+ people across our industry joining us in Vegas this year. The event is completely new, totally reimagined, from the experience to the content and we can’t wait to see what connections are made and what is learned on the other side. 

Jason: After 18+ months of Zooms and webinars, what part of in-person events have you missed the most?

Scarlett: Simple answer — the spontaneity and serendipity of connecting live.

There are many things that virtual is great for but you can’t recreate the magic of real life events. I have been a longtime Money20/20 attendee and just thinking back to my time standing in line waiting to grab my badge and getting goosebumps walking the floor; you never know who you will meet until you are there and it happens.

Every time you turn a corner there is a new opportunity from the most senior executive of the biggest bank to a longtime friend you hadn’t seen in ages that is actually your next deal, so many opportunities. 

Jason: How have in-person meetings and conferences in the post-COVID world changed?

Scarlett: I think in general, people are being much more particular and specific around what events they go to. Where pre-COVID they may have attended 10 events a year, they may now only attend 2 or 3.

In general, I think we all are valuing our time in person more than before. What are the key things that need to get over the line?

My guess is that post Covid, there will be a lot more deals, decisions, etc done post conferences as people will use them as an opportunity to close things out and solidify things that have previously been discussed. A lot of business comes down to people and the ability to interact face to face, share a coffee or dinner with someone speaks volumes. 

Jason: The fintech industry has come a long way since Money20/20 launched in 2012. What has changed the most over the years, in the show and in the fintech industry?

Scarlett: In terms of the show, time after time, we see that our industry is seeking a place to come together and we are that spot — we are where business happens at pace.

As we sit at the center of the ecosystem, we have conversations with thousands of people and most of the companies in our space. Money20/20 is focused on how we can take that knowledge to provide greater value. In a bespoke way and at scale.

In terms of how the fintech industry has changed, I would say that we have moved from being on the fringe to being mainstream. The concept of “fintech” touches so many parts of our society outside of industry and that will continue to happen. We have also moved from the focus being primarily on B2C to a more B2B mindset.

Jason: What current fintech industry trend are you most excited about? Least?

Scarlett: Oh trends. While probably the least sexy part of the business, infrastructure is what excites me the most.

I have been in far too many boardrooms where there is the right strategy and support to move things forward, but they are limited by their back end and capabilities surrounding that.

We have had a million conversations around the buy or build concept, but I fundamentally believe that if we get the infrastructure play right, the possibilities are endless, both for the banks and the fintechs, allowing each one to grow and scale in ways not achievable before.

In general, I am less excited about the next neobank, I do believe that we will reach a point of over segmentation. That being said, I enjoy hearing how the next generation of neobanks are solving problems that are more broadly applicable like digital onboarding and identify validation/verification. 

Jason: You've worked in innovation & digital functions in banks; do you think banks and fintechs are on a level playing field when it comes to innovation? Why or why not?

Scarlett: If we are focusing solely on innovation, then no, I don’t believe they are on level playing fields.

Have you seen a Chief Innovation Officer at a fintech? Probably not, because inherently, a fintech’s primary purpose and product is innovative and “disrupting” the status quo.

What fintechs do well is massive customer engagement, they identify a specific problem and work on solving it incredibly, and they have the ability to iterate and change on the fly. On the other hand, banks have a myriad of advantages including scale, resources, and time. 

Jason: You're the Chief Strategy & Growth Officer for Money20/20; what does “growth” mean in this context? What strategies and tactics do you employ to grow the business? What are the KPIs for success?

Scarlett: Great question.

This is a new role within our business and one I am extremely excited about. Growth means many things.

  1. Grow our shows- we all know the stats, the fintech space in general is growing and more non-traditional players are entering the market. How do we capture the mindshare of the new entrants, providing value and meaningful connections? How do we ensure we are providing enough value for different people resulting in our existing delegates bringing more people from their respective communities? If you first attended Money20/20 as a founder of a seed stage startup, how can we ensure that as you grow, you grow with us? Bringing more team members? Sponsoring?

  2. Extend — How do we build on our relationship with our community outside of the show to become a 365, 24/7 brand year around. Stay tuned, we have lots of exciting updates for you on that for 2022 :)

Other Good Reads This Week

Can Jane Fraser Save Citigroup? (Bloomberg)

Breakdown: Buy Now, Pay Later’s bill is coming due (Reuters)

Racial Bias Skewed Small-Business Relief Lending, Study Says (NYTimes)

Fintech Business Weekly Resources

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