1) How to monetize a SuperApp 2) Visa, Mastercard and the $200 trillion opportunity
Welcome to my newsletter! Each week two hand-picked topics from the world of fintech, payments and banking with behind-the-scenes analysis!
1) How to monetize a SuperApp
These days everyone wants to be a SuperApp but only a handful have managed to succeed. Those who have share one common denominator: monetization. Let’s see how it can be done.
Here is my summary of the most successful strategies:
1. An ecosystem play – as opposed to providing mere access to an array of different services – with seamless, integrated, end-to-end experience across all aspects of modern life.
2. Payments as the undisputed underlying layer that acts as a connecting base for the multitude of offerings on the platform.
3. A wide range of integrated payment methods catering for different use cases and target audiences (P2P, BNPL, money transfer, instant payments, online payments, QR codes, etc).
4. Low customer acquisition costs as a direct result of the platform play and then up-selling and cross-selling of high-margin financial offerings (i.e. lending, investment, insurance, e-commerce, digital banking) and merchant added-value services (i.e. merchant financing, collection technology platform).
5. Data as the predominant tool for driving high engagement with tailor-made offerings that transformed how, when and in which context services are offered.
6. A two-sided consumer and merchant ecosystem with the platform acting as the bridge that not only connects the two sides but fuels growth from one to the other in an open, two-way dynamic relationship. In such a set-up platform engagement (consumer side) enables merchant growth creating a self-reinforcing loop based on high frequency and high repeat rates that lead to consumer stickiness and retention.
7. Software and cloud services to a range of B2B partners (enterprises, telecoms, digital platforms, fintechs), which act not only as a platform amplifier but also as multiplier of customer engagement that unlocks additional customer data points and insights.
8. A subscription-led ecosystem for merchants: the platform becomes the enabling layer for partners, merchants and other tech providers to accept payments through a wide variety of instruments, including subscription-based models that create permanent revenue and stickiness.
9. Help merchants drive revenue growth via marketing channels: merchants sell discount deals, gift vouchers and other digital goods like tickets to platform users.
10. Leverage a network of banks and other FS providers to expand distribution channels.
11. First-mover integration advantage with the local ecosystem. Paytm was, for example, the first app to launch UPI Lite in India and has subsequently enabled wallet interoperability that allowed full KYC Paytm Wallets to be universally acceptable on all UPI QR codes and online merchants.
Opinions: my own, Graphic source: paytm quarterly reports
2) Visa, Mastercard and the $200 trillion opportunity
While the rise of payments has been synonymous with C2B, the next growth phase is going far beyond in a market that is 10 times as big. Visa and Mastercard are after the pie. Here is how.
Visa is calling it the new flows business. Defined as everything that goes beyond C2B, namely P2P, B2C, B2B and G2C. And it claims they represent some of the largest payment opportunities in the world.
How much?
$200 trillion annually, excluding Russia and China.
For comparison: in a similar analysis Visa estimates the size of consumer payments at $20 trillion annually, excluding again Russia and China.
And while consumer remains their core business, most of the future growth will come from this pot. Here is how:
- By growing B2B payments via Visa Commercial Solutions. Addressable opportunity: $145 trillion per year, excluding Russia and China.
- Accounts payable and accounts receivable: an $105 trillion opportunity.
- Cross-border (Visa Commercial Solutions and Visa Direct Platform): a $20 trillion opportunity annually.
On top of those comes a layer that will only get bigger and more significant: value-added services. Which means leveraging on existing customers by building additional products and services. This is an industry-wide trend that is key for differentiating (away from commoditization) and for growing the existing business. Also beyond C2B: issuing, acceptance, risk and identity, open banking, advisory.
It is impressive how similar Mastercard’s strategy is, albeit with different number forecasts:
- Much like Visa, focus is on 2 strategic priorities beyond consumer payments: 1) commercial and new payment flows and 2) services and other solutions.
- Commercial payments is an $80 trillion serviceable market consisting of POS purchases and invoiced payments from businesses and governments.
- New payment flows, mainly disbursements and remittances estimated at $20 trillion yearly.
- And of course, embedded value-added services and solutions is the differentiator that comes on top of commercial payments to round the offering.
Despite their dominance, this is not an opportunity only for big players. The space is so big, versatile and complex that fintechs with the right focus on use cases and segments have high chances to succeed and to scale. Indicative areas that come to mind: payment processing, infrastructure and API integrations, cross-border payments, dedicated solutions for accounts payable and accounts receivable, bookkeeping, treasury, taxes, marketplaces, supply chain.
The time for going beyond C2B payments is right. The space is huge and remains one of the largest untapped opportunities in finance and beyond.
Opinions: my own, Graphic and information sources: Visa and Mastercard yearly and quarterly reports