FINTECH SNARK TANK COMMENTS
According to the Wall Street Journal, retail giant Walmart has announced that it will acquire two fintech startups including Even Responsible Finance, which Walmart already uses to offer its employees early access to salaries, and ONE Finance, a neobank.
According to Omer Ismail, managing director of Walmart’s fintech unit and former director of the Marcus business at Goldman Sachs:
“The strategy is to create a super app for financial services, a single place for consumers to manage their money.”
The Wall Street Journal reported that the acquisitions are expected to close in the first half of 2022 and that Walmart still has about $250 million in cash left for further acquisitions or investments.
Walmart first announced plans to launch a fintech unit in March 2021. Around that time, I published an article titled Walmart’s Fintech Ambition: A Super App, Not The ‘Bank Of Walmart’ and wrote:
“Walmart’s fintech aspiration goes far beyond just creating a digital bank: it’s about creating a true digital ecosystem in the form of a super app.”
Wait, what’s a great app?
Although not a common term in the United States, the concept of “super app” is often misused and misunderstood. Simply selling many different types of products and services on a mobile app does not make an app a great app.
Super apps are ecosystems. They are closed experiences that make it easier to complete a wide variety of tasks, as long as the tasks take place within the walled garden.
So far, super apps don’t really exist in the US, but they’re dominating in China. A screenshot of one of the leading super apps, WeChat, shows the breadth of services integrated into a single app.
The following table shows a comparison of the services included in three of Asia’s most popular super apps.
The term super app is often misused here in the US because the technical aspects of a super app are misunderstood.
Super apps rely on mini-programs, lightweight apps that run inside another app. They don’t need to be downloaded or upgraded through app stores. They allow one application to service multiple applications.
Walmart has a long way to go to become a super app
Walmart’s super app opportunity is much bigger than just acquiring and integrating a neobank and earned wage access provider.
To achieve super app status, Walmart will need to integrate its: 1) Shopify marketplace; 2) Connect the advertising platform; 3) health centers; and 4) existing investments in e-commerce, logistics, supply chain and inventory management.
It will not be an easy task.
Two factors have prevented – or at least resisted – the development of super apps in the United States:
- Industry structure. Many industries in the United States are dominated by oligopolies – three to four very large companies that control 60-80% (or more) of the market share in that industry. A company outside this industry trying to create a super app will encounter resistance from oligopolies who may see themselves as potential creators of super apps.
- Consumer behavior and attitudes. The heterogeneity of the American population in terms of wants, needs, and desires means that the loss of choice that inevitably comes from using a super app will be shunned by large numbers of Americans.
So Walmart won’t be able to make a great app in the US, right? Not necessarily. There are two reasons why Walmart’s prospects for a super app in the US are legitimate. Walmart has:
- An underserved clientele. Virtually everyone in the United States shops at Walmart at some point, but the company’s core segment – low-to-middle-income, non-urban consumers – are often underserved by the oligopolies that dominate many industries.
- A step ahead. Walmart may start from scratch to build a great app, but it has decades of experience building an integrated, cross-industry supply chain. With the exception of Amazon, who else can make that claim (and I’m not even sure Amazon can make that claim)?
While Walmart will position a Super App based on how it benefits low- to middle-income consumers, the company stands to benefit significantly from a successful walled garden. Its DNA is efficiency and cost control, and it’s the ultimate promise of a super center super app.