The Future of the Super App

X marks the spot. Last month, Elon Musk changed the social media giant’s name from Twitter to X Corp. With new CEO Linda Yaccarino at the helm, X will focus on a new decade of innovation, leaving behind one mired by stagnant growth and weak governance.

This isn’t Elon’s first rodeo. In 1999, he founded an online bank called X.com, intending to build a breakthrough full-service financial platform. This hub would be the one-stop shop for users to access credit cards, buy stocks, and send money. The vision, albeit daring, remained just that. Burning money rapidly, X ultimately merged with Confinity, a payments rival started by billionaire entrepreneur Peter Thiel. The joint venture would ultimately yield what is now PayPal.

After being ousted from PayPal nearly 25 years ago, the Tesla CEO looks ready to complete his original vision — turning X into a one-stop everything platform. Some may say this change results from decades of interest in the X brand, which Musk bought back from PayPal for personal reasons in 2017. Others might argue it’s a desperate bid to stoke investor curiosity, as new funding will improve the worsening financial health of the company previously known as Twitter. After all, Elon took Twitter private at an aggressive 10x revenue multiple - realizing any decent return hinges on adding functionality to the app or capturing a TAM larger than previously defined.

Regardless, it reflects a broader trend that will finally develop in the United States after mass adoption abroad: the rise of the super app.

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One App to Rule Them All

‘Super apps’ are multifunctional platforms that offer a wide range of services, including messaging, investing, entertainment, eCommerce, and more. Imagine Twitter, Uber, Venmo, and Amazon combined: a one-stop shop for everyday needs.

The underlying payment infrastructure lets users purchase products or goods without leaving the app, creating a seamless user experience. For any services not provided by the parent company, third-party apps are often integrated with the platform. This results in a digital ecosystem with unrivaled network effects - keeping users on one platform results in more data and behavioral insights, which can be leveraged for targeted marketing, product development, and other business strategies. As ML algorithms personalize offerings over time, the app becomes incredibly sticky and engaging.

Super Apps are popular in Asia, the most notable being WeChat in China. With over 1 billion MAUs, the platform is now labeled a national security threat to the United States. Paytm dominates the Indian market, while Grab is the leader in Southeast Asia.

These apps often go to market with an initial offering and expand into broader services as they grow. WeChat started as a messaging tool before branching into social media, payments (WePay), and service bookings. Grab was founded as a ride-hailing app and expanded into groceries and financial services.

Leaders & Laggards

Super apps have reshaped the digital landscape in regions where they operate. They have influenced how businesses interact with consumers, altered the monetization strategies of digital platforms, and challenged the concept of app singularities. So why has adoption lagged in the United States and Europe?

Market dynamics have played a role. The US and Europe boast mature tech sectors with many players - consumers have become accustomed to a range of specialized apps ingrained in daily routines. This competition made it difficult for a single company to achieve the dominance necessary to become an actual super app. Meanwhile, many Asian countries skipped cycles of digital development - they lacked a robust financial infrastructure, leaving a gap in the market for comprehensive digital solutions, ultimately filled by super apps.

Furthermore, the regulatory front has been challenging - Western nations have strict regulations, particularly around data privacy and finance. Different governing bodies oversee various industries: the FCC is in charge of telecommunications, the SEC handles financial services, and the FTC ensures data privacy and consumer protection. Building a super app across verticals would mean answering an entourage of different regulators, a difficult feat with so many parties breathing down your neck.

Consumer behavior can also explain the lack of adoption: users have hesitated to centralize so much personal and financial information in a single platform due to security and privacy concerns. In some Asian markets, there's a cultural preference for all-in-one solutions. This isn't necessarily the case in the West, where specialization is often preferred - until now.

The Tide is Turning

According to media outlet Axiom, Elon’s vision for X spans a moneyless marketplace, public square, shopping, and video content factory. Although that may be ambitious, given current consumer behavior, it paves the way for an initial version of a super app: the super wallet.

Most of us use physical wallets to carry credit cards and IDs. They allow us to transport items for daily transactions and identification - their value is directly linked to the physical cash or cards inside.

In contrast, digital wallets have emerged to streamline transactions: making contactless payments, purchasing online items, transferring money, and storing tickets and boarding passes. Spurred by the pandemic and the need for contactless money management solutions, digital wallets have been steadily adopted. Apple is the leader in the space, leveraging its vast user network, brand recognition, and UX expertise to gain trust among users.

Although digital wallets are more convenient than their physical counterparts, both are otherwise disconnected from our broader financial lives. They are systems of record and storage, nothing more.

The future of finance won’t look like this.

Financial Super App

Growth for super wallets will be driven by demand for personalization, automation, and customization. As digital lifestyles become more complex, with multiple apps for various functions, more users will turn to platforms that manage all financial matters in one place.

Several companies are moving beyond the single-function app functionality in response, adding services beyond payments. The result increasingly looks like what we can call a super wallet or financial super app: a connected ecosystem where users can manage payments, savings, investments, crypto, budgets, loans, insurance, and more, all in one place.

While there isn’t a clear winner in the US market, several players compete for a share. PayPal, initially known for its online payment services, has evolved to offer direct deposit paychecks, high-yield savings accounts, and budgeting tools. By acquiring the P2P app Venmo, the company has reached a younger audience and expanded its social capabilities. Amongst Gen Zs, the name ‘Venmo’ has become synonymous with all payments, a powerful brand for its parent company.

SoFi, one of my favorites, began as a student loan financing company, later introducing insurance, educational courses, and credit cards. Investors on the platform are ranked based on their portfolio’s performance, adding a gamification component that drives engagement. The company’s impressive run includes receiving a national banking charter from the OCC and sponsoring the SoFi stadium in Los Angeles. Investors have also been rewarded, with the stock up 86% YTD.

Several fintech companies follow a similar strategy across the pond. UK-based Revolut initially catered to international travelers, offering currency exchanges at interbank rates. Under Revolut Junior, kids can create accounts that teach financial literacy at a young age. And for SMBs, Revolut Business provides multi-currency accounts, expense management, and other B2B services. Meanwhile, in Paris, Lydia has raised nearly $300m to continue its expansion of stock and lending features.

Most companies have chosen one of two GTM strategies: Winner-Take-All or Aggregation Approach.

In a Winner-Take-All approach, companies initially offer one financial service to an established user base, like lending, payments, stock trading, etc. This is otherwise known as a beachhead. Over time, additional services are added to drive user retention and loyalty. Well-known companies like Robinhood, Square, and Chime fall under this category.

In an Aggregation Approach, companies with an existing model create digital marketplaces that connect users to existing ecosystems of financial products. Customers are simultaneously driven to third-party offerings and in-house products, like Apple’s digital wallet and branded savings account.

Despite Asia-based super apps catering to all aspects of daily life, it’s safe to assume that their Western counterparts will be limited to financial services. Regardless, the activity in the space signals stiff competition, and for a good reason - whoever claims the top spot as a financial super app would join the trillion-dollar club and become one of the most valuable companies in the world. Money talks, after all.

AI: the Financial Companion

In the short term, the super app winners will be those with superior branding and distribution channels. Convincing users to join the platform for financial matters relies mainly on customer acquisition and platform security - expensive but possible.

Over the long term, however, these super apps will still be limited to systems of record and storage (albeit ones with a better UX/UI). The next step will be platforms that shift from organizing people’s money to actively managing it.

According to a Capital One study, nearly 80% of Americans feel anxious or nervous about their financial health. Even worse, 58 million Americans have zero retirement savings. Whether that results from fear, ignorance, or working conditions is up for debate, but it’s clear that consumers want someone to fix their financial health.

Generative AI will make this possible. LLMs can already analyze financial portfolios, calculate returns against broader market indices, and evaluate the risk profile of stocks. Soon, fintech apps will plug into this infrastructure and make decisions on users’ behalf.

It will start with low-complexity tasks, such as debt refinancing. Consumers are often unaware of the interest rates they pay on student loans, mortgages, or credit cards. Even if they are, many find refinancing not worth the effort - it involves researching providers, closing costs, and penalties. The process has never been easy because lenders aren’t incentivized to make it so - their business model relies on interest income.

AI will solve this problem as a companion that scours your credit information, pulls relevant options, and executes refinancing for you. Depending on the lender and market conditions, a 50bps rate improvement can save consumers thousands of dollars over the loan term. All in a single click.

There is also the opportunity for super apps to purchase stocks based on an investor’s profile. If a consumer has, let’s say, 30 stocks in a portfolio, AI can learn from trading activity and ultimately begin executing on its own. This could mean analyzing market trends and valuations, selling overpriced stocks, and reallocating a portfolio to ensure optimal risk/reward. This would drastically level the playing field for investors, allowing them to build wealth despite historical knowledge gaps.

Time will tell how the market reacts to AI trading against AI, but that’s a deeper topic for another day.

More complex activities, like tax preparation and estate planning, will become available as super apps develop. While basic tax software exists today, AI can further automate tax preparation by analyzing a person's complete financial picture, making predictions about future income and expenses, and suggesting strategies to minimize tax liability. AI can continuously monitor tax law changes, automatically update calculations, and forecast the long-term implications of different estate planning strategies.

Until now, these capabilities have not been possible, but the companies that can best leverage this technology will emerge as global leaders that redefine the world of finance.

Takeaways

Elon Musk might not turn X into the next WeChat, but we shouldn’t bet against him to develop the next leading financial platform. Driven by shifting consumer preferences and app fatigue, American companies are already moving towards creating their versions of the super app. So while the biggest super apps may be limited to the Asian market, super-ish apps may soon arrive in the U.S.

Cheers for reading.