Banking

As fintechs develop ‘super apps,’ are banks partners or rivals?

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More fintechs are developing “super apps,” which are designed to bring together services from new and legacy financial services providers — and in some cases, could replace the need for a separate bank account.

PayPal, for example, is promising its own super app in the third quarter of 2021. “It will be an all-in-one personalized app,” Dan Schulman, PayPal’s president and CEO, said during the company’s earnings call on Wednesday.

“Consumers are turning to brands they trust when it comes to choosing a super app. That clearly plays into our strength,” Schulman said.

Other than PayPal, apps from Curve, Instarem, Revolut and Wise that started with a single service are adding a raft of features such as fast low-cost remittances, bill payments, savings, budgeting, and installment loans. While providing some of the services themselves, these fintechs can also provide access in a single location to products from financial services partners.

Because these apps are relatively new, they can offer a fresher interface while using open banking to link to customers’ external bank accounts. And in some cases, the super apps are also able to substitute for a traditional banking relationship.

“In the U.S., super apps encourage consumers to deposit their salaries and stimulus checks directly into their payment accounts, and they all issue debit cards which make the funds accessible and spendable,” said Aite Group Senior Analyst Talie Baker.

“PayPal’s mobile app is intuitive and cool,” Baker said. “It’s so much easier to sign up for a PayPal account than a bank account, and the mobile experience is so much easier than any FI’s mobile app.”

Companies like Square have reported heightened activity from stimulus payments. Square’s Cash App, which began as an interface for a simple email-based P2P payment system, has become a launchpad for additional financial services including a debit card and bitcoin purchasing.

But there are also partnership opportunities, such as Google’s work with Citigroup and Stanford Federal Credit Union on its Plex account within Google Pay.

“Our customers are immigrants with bank accounts and properties in their home country and the country they immigrated to; they want to manage their financial life from one place,”said Ruchika Kohli, U.S., Canada, EU and U.K. consumer head at Instarem.

Baker predicts the user experience for super apps will continue to drive demand for the expanded services the super-apps are starting to offer. If the super apps were to offer payments at the point of sale, this could catapult them to greater consumer adoption, Baker said. “This could enable them to become a global WeChat or Alipay.”

There is a trend for remittance and payment services providers to morph into all-in-one apps, according to Ruchika Kohli, U.S., Canada, EU and U.K. consumer head at digital remittance provider Instarem.

“Consumers don’t like having lots of payments and banking apps to log in to, so they want to consolidate,” Kohli said.

Instarem, which is owned by Singapore-based fintech Nium, serves over 100 markets and has 130 million customers, processing $6 billion in transactions annually. The firm has announced plans to move beyond consumer and small-business remittances to become an all-in-one app provider.

Instarem’s first step will be to launch the Amaze debit card that will enable consumers to consolidate all their cards into one payment instrument. It is also developing neobanking services that will be launched in various geographies in the next few years.

While Instarem hasn’t decided what financial services to include in its super-app, Kohli said a possibility would be social media payments and a dashboard of users’ linked bank accounts showing holdings in these accounts.

“Our customers are immigrants with bank accounts and properties in their home country and the country they immigrated to; they want to manage their financial life from one place,” she said.

Building a stronger and more engaged client base through a super app is a driver for fintech expansion into new product areas, according to Celent Senior Analyst Kieran Hines.

“The more services you offer customers, the more likely they are to remain your customer and, with payments, being top-of-wallet is very important,” Hines said.

Another driver for super-apps is revenue growth, since the wider the range of efficient and competitive products a company can offer its customers, the better it can reach its growth targets.

“Fintechs such as PayPal are looking to emulate the success of Alipay and WeChat Pay, which have created one-stop-shops for financial services in Asia,” said Hines. “If you’re at the heart of the financial relationship with the customer, it’s far easier to be the organization that generates the financial benefit of that.”

It’s a natural next step for fintechs such as Revolut and Wise, which were initially heavily focused on FX services, to look for adjacent areas where they can add value, Hines thinks. TransferWise rebranded to Wise to emphasize the fact that it is now a global payments network offering multiple B2B and consumer services such as multi-currency debit cards with pay-in and payout capabilities, not just a remittance provider.

“Revolut’s vision is to become the ‘go to’ financial super-app for consumers and businesses by offering them one place to manage all their financial lives,” said Joshua Fernandes, U.K.-based Revolut’s product owner for open banking. Through its Lithuanian bank license, Revolut offers banking services in 12 EU countries and recently applied for U.K. and U.S. banking licences.

Revolut turned to U.K.-based TrueLayer’s open banking technology, as it was looking for a way to give its customers a complete view of their finances without having to log into multiple websites and apps, said Ossama Soliman, TrueLayer’s chief product officer.

Funding Revolut accounts using manual bank transfers was time-consuming for customers, requiring them to log into their external bank’s website or app to set up a payment, Soliman said.

“Adding funds using credit or debit cards was also a disjointed experience for customers, and came with the risk of fraud and additional transaction fees for Revolut,” Soliman said. “Our payments API enables customers to top up and access their Revolut funds instantly in real-time, without entering card details or sharing their bank credentials.”

U.K.-based Curve provides a card that acts as the front end to customers’ existing cards and accounts. “Our vision is ‘one card to rule them all’,” Nathalie Oestmann, Curve’s chief operating officer, said. “Curve isn’t a bank, we’re an over-the-top banking platform that houses multiple cards and accounts in one card and app, giving customers a tool to aggregate their finances.”

In December 2020, Curve partnered with Plaid to use open banking technology so its U.K. customers can connect all their payment accounts at 95% of FIs in the U.K. and view their linked cards’ real-time balances.

Oestmann said Curve enables customers to experience the benefits of 21st century digital banking without ending their relationship with their existing bank. “In France, the pain point is the legacy tech used by many of the incumbent banks,” she said. “Just 2.5% of French consumers changed their bank in 2019, despite nearly 17% saying that they wish to do so.”

During 2021, Curve plans to roll out its Curve Credit product which offers installment loans, and also plans at some point to offer refinancing deals for customers’ credit card debt. Curve Credit gives customers the tools to make borrowing decisions that suit them, Oestmann said. “They are able to create an affordable installment plan, taking control of how and when they want to make repayments.”

Curve also plans to enter the U.S. during 2021, Oestmann said. “The U.S. is a huge market, so it’s natural that we want to make it there. But it’s a very different market to Europe, so we’re ensuring that we will launch a product that serves the needs of U.S. consumers.”


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