The key to a superapp’s success is a super wallet

Long before Sea Limited became the world’s top performing stock in 2020, super apps were expected as the next big growth opportunity in Southeast Asia. In what has turned into a three-way race between Grab, GoTo and Sea, the question many are asking is who is going to win.

While we don’t try to predict an ultimate champion, the history of Chinese superapps gives us clues to the next stage of the Southeast Asian battlefield: payments.

What is a superapplication?

The concept of a super app was first popularized in China by Tencent’s WeChat and Ant Group’s Alipay to describe the all-in-one nature of these apps, used by consumers and merchants for virtually any type of service.

It didn’t take long for the emerging tech platforms in Southeast Asia to spread, driven by similar secular trends. Today, consumers across Southeast Asia are using these one-stop-shop apps to manage their daily needs: commuting to work, ordering food and groceries, consulting doctors and even managing. of their investments.

No matter where they are, the end goal of any superapps is the same: ubiquity. This is where the payments come in.

The superpower of payments

WeChat and Alipay were mobile wallets before they became super apps. Their success is in large part due to the underlying payment basis which brings together the multitude of services available on each platform and makes it easier for users to try new ones. By expanding “one-click shopping” to offline stores, they helped usher in the cashless revolution in China.

Southeast Asia is on the cusp of a similar transformation. It shares many of the conditions that have made the mobile wallet boom in China: 90% mobile internet penetration, rapid urbanization, and a traditionally cash-rich society with more than half of the population not having access to formal banking services.

The path to dominance in Southeast Asia will be determined by the following factors:

Regional scale. Payments have always been a game of scale, but Southeast Asia’s largest market is less than a fifth the size of China. Unlike China, Southeast Asia is a diverse mix of at least 10 different nations with different languages, standards of living, and market regulations.

When GrabPay (Grab’s e-wallet) launched in 2016, the company had a strategic advantage with its strong presence in the six major Southeast Asian markets, which gave it length. in advance. GoPay was also launched in 2016, but has had a relatively limited presence regionally, given its hyper-concentration in Indonesia.

Sea’s ShopeePay is the late comer. It was launched in 2018 with aggressive marketing spend and a focus on e-commerce which has helped chart the phenomenal growth of the business. Sea and Grab each operate in six countries, making them more likely to reach the coveted scale.

Frequency and cross-selling. Despite the growth of these platforms, cash payments remain the best known and most trusted method of payment. Only 17% of total transactions in Southeast Asia today are cashless. The best way to change this consumer behavior is to make cashless transactions a commodity.

This is where Grab and GoTo have the upper hand. Carpools and deliveries are used on an almost daily basis. Connecting mobile wallets to these high frequency use cases is helpful in creating repetition, which evolves into habits and ultimately confidence.

It also means more opportunities for cross-selling services to users. For example, Grab drivers can pay as little as 10 cents per trip to accumulate up to $ 200,000 in insurance coverage.

This is why Sea’s Shopee has embarked on food delivery and GoTo combines an e-commerce and daily services portfolio in Indonesia through the merger of GoJek and Tokopedia.

However, the key to mobile wallet leadership is convincing users to use it on a multitude of ecommerce sites and in stores. Grab is counting on it. About 40% of his 2020 POS has been achieved off-platform and he expects it to reach 60% by 2023.

The future of the super wallet

The battle for mobile wallets in Southeast Asia has just started. As the payments landscape continues to grow, mobile wallets will be a launching pad for other financial services such as loans, insurance, investments, and digital banking.

Grab and Sea have already secured digital banking licenses in Singapore, paving the way for this transition. These companies can begin to think about an end-to-end financial services journey for consumers. They can help increase users’ wealth by investing, enable them to manage their finances with loans, and protect what they value with insurance.

This is the real purpose and much greater opportunity for superapplications: to continuously bring formal banking services to the next 100 million or more underbanked and underserved users. Once achieved, we predict one of the greatest stories of economic growth in history.

By Jixun Foo, Managing Partner at GGV Capital. GGV Capital is a global venture capital firm that has invested in Grab and other companies such as Affirm, Airbnb, Alibaba, Didi, Grab, HashiCorp, Peloton, Slack, Square and StockX.

This story was originally featured on Fortune.com

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