Perspective on super app core elements and drivers; Data privacy and financial app usage; Web3 and the network effect; and more

Perspective for today:

  1. Core elements of super apps;
  2. Data privacy and financial app usage;
  3. Web3 and network effect;
  4. 10 pillars of the connected economy;
  5. The rise of cryptocurrencies;
  6. Evolution of marketplaces;
  7. Drivers of super apps;
  8. Fintech x Healthcare;

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Core elements of super apps

1. Popular services

Super apps should allow customers to use popular services that are essential or often used in the daily life of customers. For example, most of us use taxi services, order food, or use entertainment services in our daily life.

2. Payments

Payments have become a core element of every app and super apps are no exception. Super apps with payment services at the core will help customers manage their financial life, save, spend, and invest.

3. Marketplaces

The marketplace of goods and services is a place where businesses and consumers meet, therefore, super apps with marketplaces will be attractive for both merchants and consumers. In combination with payments, marketplaces will create a seamless experience for both sides.

4. Content

Content is the element that brings back customers to your app and increases customer stickiness. Super apps should focus on user-generated content and delivering it at the right time.

What else would you add to the list?

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Data Privacy and financial app usage

This year, slightly more fintech app users (73%) are confident that their information is both private and secure compared to 70% in 2019 according to the 2021 Consumer Survey: Data Privacy and Financial App Usage by The Clearing House (TCH).

However, that confidence does not appear to be based on actual awareness of what data is collected or how it is stored and shared.

• 80% are largely unaware that apps use third-party providers to gather users’ financial data.

• Only 24% know that these data aggregators can sell personal data to other parties for marketing, research, and other purposes.

• 73% of app users are unaware that fintech apps have access to their bank account username and password even though app users have given that information as part of the sign-up process.

• 78% didn’t know aggregators regularly access personal data even when the app is closed or deleted.

The lack of awareness may stem from the fact that, on average, 77% of consumers admit that they didn’t read the apps’ terms and conditions.

Further, a majority of those who say they read the terms report that they don’t understand them. It is clear that consumers need and want greater transparency into fintech apps’ data collection practices and more control over their data.

Over half of consumers would like fintech apps to be required to provide clear disclosure of what data third parties will have access to and to provide a clear explanation of the risks associated with using the apps. Likewise, a majority want control over what kind of data third parties can access.

There is no doubt that Americans will continue to seek out the convenience provided by fintech apps. But with growth comes responsibility for fintech apps to meet their customers’ demand for more transparency about their data collection practices and greater care in protecting consumer financial data.

Source article.

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Web3 and network effect

One of the main issues in the fintech market is the high cost of customer acquisition. Have you ever thought how fintechs can use Web3 to create a network effect and lower customer acquisition costs?

The killer app of the internet is networks. The web and email are networks. Social apps like Instagram and Twitter are networks. Marketplaces like Uber and Airbnb are networks.

Networks get more valuable with more participants, which is great when they are at scale, but cuts the other way when starting out. This is the bootstrapping problem.

In the Web2 era, overcoming the bootstrapping problem meant heroic entrepreneurial efforts, plus in many cases spending lots of money on sales and marketing.

Because bootstrapping networks is so hard, it’s likely that there are many networks that should exist — that would improve our collective well-being — but don’t because no one has figured out how to bootstrap them.

Web3 introduces a powerful new tool for bootstrapping networks: token incentives.

The basic idea is: Early on during the bootstrapping phase when network effects haven’t kicked in, provide users with financial utility via token rewards to make up for the lack of native utility.

Over time, as the network effect and native utility grows, the token incentives taper off and eventually go to zero, and the world is left with a new, scaled network.

Let’s take a look at this example. A network that’s been bootstrapped with token incentives is Arweave, a decentralized storage network. The Arweave network has grown roughly 12x in the last year.

Token incentives are effective, but also far fairer than the centralized Web2 model. Shouldn’t the people who helped build a network get to own a meaningful piece of it?

You don’t need to spend money on marketing when users are genuine owners, love what they do, and love telling other people about it.

Web3 allows the users and builders who create networks to own a meaningful piece of them, while also unlocking powerful new tools for entrepreneurs.

Source article.

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10 pillars of the connected economy

How do consumers live — and want to live — in the digital economy? And, as important, how connected do they want those discrete digital interactions to be inside of a single, connected ecosystem?

Let’s examine the 10 pillars of the connected economy, as PYMNTS has defined it: how consumers pay, bank, shop, eat, have fun, live, work, travel, communicate and stay healthy.

The Cornerstone Pillar

The Cornerstone Pillar of the connected economy is the first and strongest of all: Banking. More consumers report banking than engaging in any other activity online, and money management helps drive commerce across all 10 pillars. Information seekers are also most interested in integrating banking with the rest of their lives online.

The Leisure Pillars

There are three Leisure Pillars of the connected economy: Entertainment, retail shopping and travel. These are activities with which consumers may not engage every day, but instead tend to do for enjoyment and special occasions. These are the pillars that information seekers are the most interested in consolidating.

The Every Day Pillars

The Every Day Pillars are the largest group of connected activities, encompassing restaurant orders, groceries, health, work, social relationships and the home. Consumers rely on these pillars, which permeate their daily lives, to get their fundamental needs met. Convenience seekers is the persona most interested in consolidating all of these digital activities into a single app.

These are what PYMNTS learned after researching 3,166 US consumers in a study conducted between Oct. 27 and Nov. 8

Source article.

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The rise of cryptocurrencies

The year is 2008, and in a bid to disrupt the centralized financial and monetary system that led to the financial crisis, Satoshi Nakamoto (assumed to be a pseudonym) published the concept of Bitcoin through a white paper, with the sole purpose of removing any third-party intermediaries that are traditionally required to conduct financial transactions. A couple of months later, in January 2009, the first Bitcoin transaction took place when Satoshi Nakamoto sent Hal Finney 10 Bitcoins, thereby heralding a decentralization revolution in the financial world.

Innovation and competition soon followed suit with Litecoin being launched in 2011, and 2012 witnessing the genesis of cryptocurrency exchange Coinbase as a platform to carry out Bitcoin transactions. Much to the delight of crypto enthusiasts, the launch of more digital currencies in the form of Dogecoin and Tether provided further crypto investment opportunities.

The biggest milestone in the early days of the cryptocurrency world was established when Microsoft began accepting cryptocurrencies as a mode of payment for games, apps, and other digital content. Further game-changers were incorporated in this developing stream of a diverse network, with the launch of Ethereum in 2015, which extended the concept of decentralization from payments to other financial products (also known as decentralized finance or DeFi) by introducing smart contracts-powered decentralized Apps.

The following years marked some of the more significant events in the DeFi world — from Revolut merging mobile banking with crypto trading in 2017, to Square’s Cash App initiating Bitcoin transactions in 2018. It wasn’t long before MicroStrategy, presently the biggest corporate investor in cryptocurrency, jumped the bandwagon of crypto delight in 2020 when it made its first investment in Bitcoins worth $250 million. Soon after, PayPal initiated Bitcoin transactions, and Square was making headlines again for making its first Bitcoin investment.

2021 has proven to be a lively year for the DeFi sphere, with Tesla and Goldman Sachs supporting the trend with their respective investments of $1.5B in Bitcoin and Coinmetrics. The month of February saw the revolutionary move by JPMorgan Chase & Co. Chase, with its pioneering creation of the JPM Coin. Other notable brands also began offering their own unique crypto offerings — such as Morgan Stanley enabling their wealth management clients to access Bitcoin funds, and Visa’s global crypto advisory service.

Since the inception of Bitcoin, the crypto world has made substantial progress and is presently valued at around $2.3 trillion.

Source article.

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Evolution of marketplaces

Marketplaces are one of the core elements of the super apps. So, where are we in the evolution of marketplaces?

The first generation of online marketplaces translated town squares and bulletin boards into eBay and Craigslist. A recognisable online migration. But marketplaces have evolved more in the last 20 years than in the previous 200.

The initial wave of marketplaces from the 2000s tended to be supply-driven and vertically focused. The next wave of marketplaces enabled the transaction to take place on the platform. In the 2010s, marketplaces became on-demand, location-based and almost fully managed by the operator to improve the user experience.

Today, we are at a time of abundance of capital, e-commerce adoption and millions of unbanked consumers in growth markets. The next generation of online marketplaces embed financial services to create a better value for the customer, increase retention and monetization.

But is it only marketplaces integrating financial services to their core product lines?

I would suggest fintech start thinking about their own marketplace. Fintech often serves both consumers and merchants why not become a link between them through a marketplace?

Would you use a marketplace if your favorite fintech app offered one?

Source article.

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Drivers of super apps

Super app drivers are high frequency services and products that are used frequently by customers because they are essential in day-to-day activities.

What are some of those drivers?

1. Supermarkets or Retail

You’ve heard it before, possibly even on this blog: ecommerce is absolutely huge, and it’s growing at phenomenal rates. Yet the vast majority of US retail sales, 92%, still happen offline. It should come as no surprise that the chief reason consumers don’t like virtual shopping is because you just can’t feel pixels.

2. Transport

Transport demand is about the movement of people and goods and we travel in order to satisfy a need (work, education, recreation etc) and we transport goods as part of the overall economic activity. So for example, work-related activities commonly involve commuting between the place of residence and the workplace.

3. E-commerce

It’s not surprising that ecommerce skyrocketed in 2020 as consumers turned to their devices for their grocery, apparel, and home furnishing purchases. The convenience of ecommerce, combined with this change in consumer behavior, reflects a stronger demand for online shopping post-pandemic.

4. Government services

We all interact with the government and the government interacts with us in one or another way. With the rise of technology E-government and its capacity could be available to all people regardless of their place or social level. It makes governments more efficient, enhances services to better serve citizens, creates accessibility, more transparency, and increases accountability of government.

5. Social

The internet has opened up communications across the boundaries of the world. And, social networking has helped people to expand their network, add friends, enhance their careers, make connections, recruit employees, and find people with scarce skills which summarizes the reason for their popularity.

What other drivers would you add to the list?

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Fintech x healthcare

Should healthcare be part of your fintech super app strategy? I think yes though I often see healthcare as a standalone service and the reason could be that healthcare services are not used as frequently as other services in my daily life.

Yesterday, I read a very interesting article by David Haber Andreessen Horowitz fintech general partner on how healthcare and fintech could possibly collaborate.

Fintech products enable vertical SaaS businesses to diversify into new revenue streams, as we’ve said before. In healthcare — a system that represents 20% of our nation’s GDP — we see three areas where fintech capabilities can supercharge the industry in 2022: consumer payments and lending, provider practice enablement, and insurance.

Healthcare payments are particularly complex due to US’s third-party payor system, in which providers bill for services, payors reimburse for those services, and consumers receive the service. So a generalized solution, such as Stripe, is unlikely to provide the full set of capabilities, like regulatory compliance and health plan integration, needed to comprehensively support a medical practice.

This leaves open the opportunity for vertical-specific payment gateways and financing products, such as “buy now, pay later” (BNPL), that help consumers finance their healthcare bills and mitigate the risk of bankruptcy from unplanned medical expenses.

On the provider side, BNPL can improve collection rates, which can be as low as 20% in some areas. There are also emerging fintech products designed to help provider practices normalize their business models into “per member per month” (PMPM) arrangements by bearing risk, as well as add billing capabilities for new service lines to diversify revenue and margin streams.

Finally, the unbundling and rebundling of traditional health insurance has created new fintech platforms that support the blossoming of novel insurance coverage products targeted at individuals and businesses. These companies modularize the underwriting, claims processing, provider network management, and utilization management capabilities that help organizations manage risk across their covered populations in more nimble, affordable, and transparent ways.

As fintech makes its way into healthcare services and software, we see the potential to rewire incentives and remove inefficiencies to pave the way for a more value-oriented healthcare system.

Source article.

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Sam Boboev

Sam Boboev

Fintech fan with product and technology background. Subscribe https://samboboev.substack.com/