The emergence of the next generation of digital challengers—super-apps—has presented a conundrum to incumbent companies, both within and outside the financial sector. Tracing the evolution of super-apps in China shows that their disruptive impact is evident. In this report we ask what lessons this holds for the Middle East and Africa, not just for technology firms poised to become super-apps but also for the incumbents themselves, particularly those in the financial services industry. We explore the partnerships which have been forged and which are propelling the development of super-apps and the technological advances that could shape the next stage of growth.
The key findings of the report include:
1. Trust, a large consumer base and local expertise are key competitive advantagesfor super-apps. Super-apps come in various shapes and sizes, and the major players in the region have each found their own competitive edge. Some players pursue an aggressive international scaling strategy, while others prioritise local expertise. Some super-apps choose to enter into partnerships with other firms, while others go their own way. What their strategies have in common, however, is an emphasis on developing a large user base and trust as a key enabler for ensuring customer loyalty and the uptake of new offerings.
2. So far, super-apps and traditional financial institutions need each other and are choosing to partner up. The Middle East and Africa (MEA) region has seen a healthy number of partnerships between incumbent businesses and superapps, which need access to the payment infrastructure that only licensed financial institutions can provide, while financial institutions can in turn gain access to new customer segments by partnering up with super-apps. This partnership currently produces a win-win situation for each player, but changes in licensing regulations, as well as the emergence of cryptocurrency could alter this dynamic.
3. Some banks and financial services providers are taking the fintechs and digital start-ups (including super-apps) on at their own game. In particular, institutions that have launched since the arrival of mobile banking some 15 years ago are in a position to develop a hybrid strategy. Their approach includes mixing theadvantages of a physical branch network with the agility and reach of a mobile-first offering. Where a bank can offer mobile digital services under its own brand, it can compete with the digital start-ups on its own terms and retain the primary relationship with its customers.
4. The next wave of transformative technological innovation, which could determine growth prospects for superapps, has already started. There are a number of emerging technologies that market players are watching closely. They include some that are already established in mature markets but have yet to become widespread in the MEA region. Open banking is one of these. There are also more distant technological prospects that promise to sweep through the business world just as the internet and mobile devices have done. Blockchain technology and quantum computing are two examples.
5. Partnership is key to the emergencen of super-apps in the MEA region. Collaboration is at the heart of the development of wide-reaching service platforms that can evolve into super-apps. Partnerships press down on operational costs, bringing together expertise from areas such as payments, financial services and technological innovation that are needed to bring super-apps to life.