David Donovan leads the Global Financial Services Practice for the Americas for digital consultancy Publicis Sapient and is a former Fidelity Investments executive.
Much of Chinese society has come to depend on so-called super apps like WeChat to do multiple tasks, from making a medical appointment to hailing a taxi to getting a loan, all on one platform.
But such one-stop shops have not taken off in the United States. Now, the time may finally be ripe — and the best contenders for super apps come from the fintech world, especially those platforms dedicated to cryptocurrency.
Cryptocurrency is quickly growing in popularity amid sky-high equity prices, record-low interest rates and fear of inflation on the horizon, and they could, perhaps, gain more legitimacy if the U.S. government decides to fully regulate them, a topic Congress is currently exploring.
Dedicated crypto platforms like Coinbase or even Paypal, Venmo and Stripe, which recently added abilities to use crypto for payments, could evolve into the U.S. versions of super apps, assuming crypto issuers can work with regulators to find a middle ground between protecting the consumer and creating new financial and investment opportunities. If consumers see crypto as secure and legitimate — and easy to use — it could become the base of super apps.
The bottom line is that people are thinking about finance not just when they go to the bank — if they even have access to a bank — but when they shop, vacation or pay for a medical visit.
Expanding these crypto and payment apps to integrate with other apps and services would make many diverse tasks more convenient. The bottom line is that people are thinking about finance not just when they go to the bank — if they even have access to a bank — but when they shop, vacation or pay for a medical visit, and such apps would help deliver the financial services they need in a personalized manner.
Integrating crypto payments into other tasks would also go a long way in democratizing the world of finance and money, giving underserved communities and those with no credit histories who struggle to open credit cards or get loans more access to financial services.
The rise of the super app
WeChat started out as a messaging app in China in 2011, but by 2013 it also functioned as a payment platform and soon offered many other services, like shopping, food delivery and taxi-hailing.
Now it offers more than a million different services, mainly through mini apps that businesses develop to work within WeChat. AliPay, which also has more than a billion users, is similar. These two apps have been credited over the last decade with converting China from a cash-only economy to one heavily reliant on digital payments, skipping over the intermediary phase of debit and credit cards.
The concept has also become popular in Indonesia and elsewhere in the region. The fact that they involve financial services, including payment options, is key, and the common thread that runs through many of the super apps’ services.
But while app use has exploded in the United States and Europe; Big Tech players like Apple, Facebook and Google have added payment services; and several payment apps like Venmo and Square have become more popular, super apps have not yet emerged.
This is partly because of data privacy regulations; privacy laws in the United States, and especially in Europe, limit data shared between apps, making it harder to create an ecosystem where mini apps can automatically integrate into super apps like Alipay.
It also stems from the U.S. having had a well-developed internet ecosystem, with popular social media sites, like Facebook, and payment sites, like PayPal, existing before the rise of smartphones, which resulted in each of these platforms launching separate apps, rather than one app offering multiple services. Compare that with China, where much of the internet was mobile-first, arising only after the advent of smartphones. The U.S. market has long been used to separate platforms for separate tasks.
But many analysts point to apps and tech companies adding more services — like TikTok adding shopping, Snapchat integrating mini apps for games or Apple entering the payment space — and say that super apps will eventually emerge in the U.S., or at least bigger apps that can do more things. Adding more services to any one app, and finding a way to keep users on it, is also a way around privacy regulations that prevent one app from knowing what its users do on another app.
Apps are clearly on track to get bigger and more comprehensive, even though it is unlikely the U.S. would end up with only one or two dominant ones, as seen in Asian markets.
The rise of DeFi
Meanwhile, cryptocurrency developed alongside payment apps and super apps over the last decade. What started out as one product, Bitcoin, has developed into an entire peer-to-peer financial system, known as DeFi, with several currencies, including Ethereum and Dogecoin, allowing users to invest, trade, spend and lend out money.
But despite its surge in popularity, especially during the economic uncertainty posed by the COVID pandemic, and more traditional financial institutions starting to offer some crypto-related services, it remains outside the mainstream financial system and sector, with many experts saying it poses high risks. Crypto issuers have also long resisted regulation, as that would go against their goal of having a decentralized financial product.
But now things are starting to change, with some crypto platforms expressing interest in following regulation.
For example, Coinbase dropped a plan to offer an interest-earning product, which would have allowed users to earn interest on coins loaned out to others, after the U.S. Securities and Exchange Commission failed to offer guidance on it and threatened to sue Coinbase if it released it. In fact, crypto issuers are realizing that some regulation would give their product more legitimacy and allow more people to use it for more purposes. This comes as new crypto products hit the market recently, including stable coins, which track the value of traditional currencies.
Regulation of crypto, an idea that SEC Chairman Gary Gensler has said he supports, along with some in Congress and some in the crypto industry, could indeed be on the horizon.
Using cryptocurrency to fuel the first U.S. super app
If crypto issuers work with government officials to set up regulation that protects consumers without limiting innovation, crypto is a good bet for what finally spurs American super apps.
Think about what could happen if Coinbase were to work with the SEC and align on smart regulation that would validate Coinbase as a viable and certified financial intermediary that users could rely on for crypto, embracing both its new financial products with potentially attractive yields in addition to its ability to use for everyday spending. Regulation would likely stabilize the currencies, turning them into something practical to shop with, rather than just hold for potential value. Such regulations would also eliminate some of the steps that add friction to current user experiences when it comes to using crypto in everyday life, like long transaction times, high transaction fees and large fluctuations in its value.
A regulatory framework would unlock massive demand for crypto, and there would suddenly be many businesses — from restaurants to retail – that would want a way to process crypto payments, spurring them to integrate into existing crypto payment apps and causing those to evolve into super apps. More people would also make deposits in crypto on these apps, rather than using traditional currencies in their banks. This would disrupt the entire economy and financial ecosystem.
Banks have always produced products they think the public wants while the world of crypto and DeFi are clearly providing products and services that people need, and millions are already using them, despite their uncertain regulatory and legal status.
Just as ubiquitous and integrated digital payments quickly emerged in China to fill a need — a cash alternative in a market underserved by credit cards — crypto-based super apps would fulfill the needs of consumers and businesses looking for a secure and efficient way to use crypto instead of, or in addition to, traditional payment methods.
If crypto remains an unregulated gray zone, and its platforms remain isolated from the rest of economic and daily life, rather than evolve into super apps, the United States will miss the opportunity to build a new and innovative mobile- and digital-first financial ecosystem.