Technology & Innovation

From online bazaar to one-stop-shop: The rise of super-apps in the Middle East and Africa

December 05, 2021

Global

From online bazaar to one-stop-shop: The rise of super-apps in the Middle East and Africa

December 05, 2021

Global
Walter Pasquarelli

Tech & Society at Economist Impact

Walter Pasquarelli is a Manager within the Tech & Society team, where he delivers research and engagement programmes that use evidence and data to drive change on critical tech policy issues. Prior to this Walter was the AI Policy Lead at an international consultancy where he advised governments and leading tech companies on AI benchmarking and strategy. As part of this he also worked as a consultant with the Open Data Institute on enabling data sharing across different sectors. Walter is an AI Policy Fellow at the Institute for Policy Research at the University of Bath. He holds a Master’s degree from the University of Cambridge and regularly guest lectures on tech policy and ethics at universities.

In 2021 WeChat, China’s dominant social media and payment app, announced that it had reached 1.2bn monthly users, making it one of the popular standalone apps in the world. What originated as a humble messaging app has over the past decade transformed into a single portal bundling together millions of third-party apps, allowing customers to do anything from payment transfers, buying bus tickets and purchasing luxury goods to transferring their monthly rent. WeChat has become not just a provider of a large array of digital services, it has become—through its ubiquity and wide range of services—intrinsic to Chinese consumers’ lives.

WeChat’s expansion began with gaming applications, for which it added payment capabilities in 2013. In parallel, WeChat offered a platform for third-party apps to offer digital services to its customer base. In doing so, WeChat emerged as the first “super-app”. WeChat’s success in augmenting a core product with supplementary revenue streams and developing a platform ecosystem has inspired firms globally to emulate it. It’s certainly not the only success story. Meituan, a popular food delivery service in China, branched out to offer hotel bookings through its smartphone app in 2013 and within five years was responsible for 50% of hotel stays in China—toppling a previous travel-booking giant, Ctrip. From Go-Jek to Grab, to AliPay or Rappi, numerous super-app contenders are battling to be the only app that a consumer needs.

While multi-function apps have been popular in Asia for some time, other markets have seen a different app ecosystem develop. In western markets, smartphone interfaces first drove the unbundling of services into separate, singlepurpose apps: consumers have largely messaged, hailed taxis, summoned food and paid for things with different apps aggregated within the mobile operating system, be it Apple’s iOS or Google’s Android. But more recently firms including Spotify, Uber and Revolut have raced to bundle ever more features into their apps, eyeing an opportunity to extend new products and services to captive audiences.

In the Middle East and Africa (MEA), the super-app model is showing early promise and consumer appeal, with emerging players seeking to emulate the Chinese-born concept and creating regional success stories of their own. To better understand the rise of super-apps, how they are proliferating across the MEA region, and what enables and impedes their expansion—from consumer norms to policy—Economist Impact has undertaken a wide-ranging study drawing on a comprehensive interview programme with experts and regional stakeholders. Key findings include:

• Locally active super-apps are proliferating across the MEA region, but larger crossregional players remain few. Firms such as Dubai-based Careem (acquired by Uber for US$3.1bn in 2020) have emerged as local champions, expanding from ride hailing to grocery delivery and payments. Other businesses have sought partnerships to expand their capabilities, such as Vodacom in South Africa, which joined forces with Alibaba’s AliPay, another popular Chinese super-app, to launch VodaPay in May 2021. The acquisition sums for regional apps—from US$500m (iFood) to over US$3bn (Careem)—suggest a valuable market.

• The prevalence of low-end mobile phones, as well as high internet costs in the MEA, make super-apps an attractive product. The MEA has historically been the region with the lowest levels of connectivity as well as high fixed-line broadband costs. Mobile operators have provided the region with affordable low-end smartphones with limited broadband capabilities. In many countries in the region the advent of cheap smartphones has allowed populations to leapfrog desktop technology. As super-apps require less bandwidth and data compared to several separated apps, they make an attractive product, suitable to the technological as well as cultural environment.

• The region’s most precious asset is its people. Stimulated by rising prosperity and economic growth, the MEA population is expected to grow to 3.4bn by 2050, becoming the most populous region in the world. This expanded market presents a wealth of customer data, which local platforms could exploit. The region also has an exceptionally young population with a higher than average openness and appetite for innovation and new technologies.

• Super-apps can be drivers for financial inclusion in the MEA. In remote areas of the region a lack of traditional bank branches has contributed to scant financial service provision. By bundling together a wider array of financial services in an all-in-one platform that requires little data or storage to operate, and can leverage users’ data to assess credit-worthiness or support payments, super-apps are enabling previously unbanked citizens access to a wider financial ecosystem.

• The harmonisation of national policies remains the biggest challenge to the scalingup of super-app presence in the MEA region. The MEA consists of more than 60 countries with over 1,000 languages and divergent economic, policy and cultural environments. Although the African Union and Gulf Cooperation Council are fostering the harmonisation of industrial and data policies, for super-apps seeking to further their reach, the current fragmentation presents a significant operational, legal and financial burden.

• A lack of vast data pools in the MEA weakens one of the market advantages that the superapp model offers. Analysing data collected from customers gives digital services invaluable information on consumer preferences. Superapps multiply this by collecting data across a series of connected services. Although the number of people living in the MEA is generally rising, no country in the region has a population over 100m. As sharing data between territories is constrained by local regulation, there is a limited market from which super-apps can collect customer data. This, combined with generally low levels of connectivity and technological infrastructure, makes for a region characterised by relatively low levels of data availability.

• A number of sectors are emerging as potential candidates for the future expansion of super-apps in the MEA. Super-apps expand into sectors that are adjacent to their current offerings and that can help them scale. In the MEA, the sectors with a high potential of takeover by super-apps include insurance, property brokerage and digital remittances. Others already seeing increased activity from digital service providers include equity crowdfunding, Islamic finance, peer-to-peer lending, and “robo advisory” (services that use algorithms to provide automated investment advice).

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