The key to superapp success is a super wallet

Grab and Sea have been granted digital banking licenses in Singapore.
ROSLAN RAHMAN - Getty Images

Long before Sea Limited became the world’s best performing stock of 2020, superapps were anticipated as the next big growth opportunity in Southeast Asia. In what has shaped up to be a three-way race between Grab, GoTo, and Sea, the question many are asking is who will win.

While we don’t attempt to predict an ultimate champion, the history of China’s superapps gives us clues on where the Southeast Asian battlefield will focus on next: payments.

What is a superapp? 

The superapp concept 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 alike for virtually any type of service.

It wasn’t long before the emerging tech platforms in Southeast Asia caught on, driven by similar secular trends. Today, consumers across Southeast Asia use these one-stop-shop apps to handle their everyday needs: from commuting to work, ordering food and groceries, consulting with doctors, to even managing their investments.

Wherever they are, the end goal of any superapp is the same: ubiquity. This is where payments come in.

The superpower of payments

WeChat and Alipay were mobile wallets before becoming superapps. Their success is largely due to the underlying payments foundation that glues together the multitude of services available on each platform and makes it easier for users to try new ones. By extending “one-click buying” to offline stores, they helped usher in China’s cashless revolution.

Southeast Asia is on the cusp of a similar transformation. It shares many of the conditions that enabled China’s mobile wallet boom: 90% mobile internet penetration, rapid urbanization and a traditionally cash-heavy society with more than half the population lacking 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 scale play, but the largest market in Southeast Asia is less than one-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 through its strong ride-hailing foothold in the top six Southeast Asian markets, giving it a head start. GoPay also launched in 2016, but has had a comparatively limited presence regionally, given its hyper-concentration in Indonesia.

Sea’s ShopeePay is the latecomer. It launched in 2018 with aggressive marketing spend and a focus on e-commerce that has helped chart the company’s phenomenal growth. Sea and Grab each operate in six countries, which makes them more likely to achieve the coveted scale.

Frequency and cross-selling. Despite the growth of these platforms, cash payments are still the most familiar and trusted form of payment. Only 17% of total transactions in Southeast Asia are cashless today. 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. Ride-hailing and deliveries are used on a near-daily basis. Connecting mobile wallets to these high-frequency use cases is helpful in creating repetition, which evolves into habits, and ultimately trust.

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

This is why Sea’s Shopee has entered food delivery, and GoTo is combining a portfolio of e-commerce and daily services in Indonesia through the merger of GoJek and Tokopedia.

However, the key to mobile wallet leadership lies in convincing users to use it across a multitude of e-commerce sites and in stores. Grab is counting on this. Approximately 40% of its 2020 TPV was achieved off-platform and it expects that to grow to 60% by 2023.

The super wallet’s future

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

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

This is the true end game and the much larger opportunity for superapps: to permanently bring formal banking services to the next 100 million or more underbanked and underserved users. Once achieved, we foresee one of the greatest economic growth stories 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, HashiCorp, Peloton, Slack, Square and StockX.

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