Stop Fretting About Musk’s ‘Superapp:’ Just Make Your Own App Better

By challenging his team to transform X into the center of its users' 'entire financial life' by the end of 2024, Elon Musk set off alarm bells in banking boardrooms across the country. The dream of the financial superapp had faded, as various efforts stumbled or were abandoned. But now the specter of disintermediation is back, with Musk at the helm. Should you be worried?

There is a bit of fintech lore that helps explain the billions that U.S. companies have put into developing a “Superapp,” a one-stop shop for banking, ride-hailing, food delivery, shopping, messaging, stock and crypto trading and other life needs.

In 2018, Dan Schulman, who was then PayPal’s chief executive, had dinner with Martin Lau, who was then the executive director at Tencent Holdings, the parent company of WeChat. As the two men talked, Schulman began to envision PayPal could be loaded with features and become a superapp in the United States like WeChat had become in Asia.

It’s not hard to see the appeal: As of late 2023, WeChat has an estimated 1.3 billion monthly users. Indeed, within a few years, the superapp strategy became a regular feature of PayPal earnings calls, and some analysts believed the plan could be a strong driver of future growth.

Other household names soon followed. Facebook, Uber and Walmart all invested heavily in expanding their digital offerings beyond their core uses. Apple and Google started to reinvent themselves as payment companies.

The argument was obvious: The more users spend time and money on your app, the more chances there are to cross-sell them and increase revenue.

Yet despite these heavy efforts, no U.S. company has succeeded in delivering a truly multiuse platform like WeChat, and many of the most ambitious plans have been abandoned. After introducing messaging and other non-payment features in 2021, even PayPal scaled back its efforts in 2022.

Can Musk Succeed Where Others Have Stumbled?

A year later, thanks to Elon Musk, the superapp dream suddenly has a new lease on life. In a late October all-hands call at X Corp., Musk told staffers he wants the company to roll out a payment platform by the end of 2024. “If it involves money, it’ll be on our platform — money or securities or whatever. So, it’s not just, like, ‘send $20 to my friend.’ You won’t need a bank account.”

Can Musk, who has often succeeded where others have failed, deliver on this ambitious goal? The hard truth is that the superapp concept faces several major impediments.

“If it involves money, it’ll be on our platform — money or securities or whatever. So, it’s not just, like, ‘send $20 to my friend.’ You won’t need a bank account.”

— Elon Musk on making Twitter/X a superapp

The first is historical: The Internet and app ecosystem developed at different times and in different ways in China versus the U.S. and Europe. Today’s Chinese giant superapps — like WeChat and Alipay — were born at a time when the country’s consumers had very few service choices. Adding e-commerce services on top of a messaging app, for example, made sense because there were so few alternatives.

That’s simply not how Western websites and apps have evolved. The first wave of e-commerce in the U.S. consisted of specialized competition — remember that in the late ’90s there were two major sites selling only compact discs! — followed by massive consolidation. The biggest winner was Amazon, which has spent billions acquiring startups in a variety of industries, some of which Amazon later developed and others it has since dropped.

The point is that China’s superapps sprang up in a market that had no incumbents in any industry. Today’s Western markets, on the other hand, are teeming with powerful incumbents in every meaningful category. X can try to add any number of financial services onto its social media platform, but it will still have to compete with Cash App, PayPal, Robinhood, Square, Venmo, and others for usage.

Read more:

Do Consumers Really Want One App to Rule Them All?

The heavy competition is intimately connected to the next impediment: There actually doesn’t seem to be much consumer demand for a superapp. Schulman has said consumers don’t want to have to remember dozens of app passwords; experts have pointed out this isn’t an argument for a superapp as much as for password management.

As Everett Cook, cofounder and CEO of the financial platform Rho, says, “Aggregation without integration is not beneficial; a single sign-in is not enough. Google already did that work for you.”

The final impediment to a Western superapp is the regulatory environment. When PayPal pulled back from its superapp ambitions last year, Schulman admitted that the company had “a different regulatory footprint” than it had anticipated.

Both the Biden Administration and the EU have issued a number of decrees over the last several years breaking up corporate combinations that look far less monopolistic than a superapp. It seems unlikely regulators would ignore any tech or financial giant grabbing market share across a wide swath of services. There is a concern too about data privacy, an area in which regulations have recently been tightened, making a true superapp more vulnerable to regulatory scrutiny.

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The Superapp Is Not the Solution; Better Apps Are

Increasingly, the superapp fantasy looks like a solution to a problem that doesn’t exist. And this is the important lesson for banks and credit unions: Focus your digital resources on what existing and future customers actually want.

There is ample evidence that banking customers are not universally thrilled with the services that already exist. J.D. Power releases regular polls about satisfaction with banking and credit card apps, and the record is mixed. Despite years of investment in digital tools, many banks still offer little more than basic transaction tools, such as account transfers and bill paying.

Even simple tools, such as peer-to-peer payments, are far from perfect. Consumer surveys routinely find concern about the safety of using such tools, as well as a sizable group who see no need to use them. 59% of U.S adults felt they don’t need payment apps, according to a 2022 Pew Research study. Consumers seem to prefer advanced tools, such as budgeting and spending analytics, but only when they feel incentivized to use them.

In a sense, this represents good news for banks and credit unions. Consumers aren’t looking for a lot of new bells and whistles. They just want the existing technology to work reliably and safely.

That’s where banks and credit unions can best spend their digital dollars: Find out what services really matter to customers and improve the offerings to meet their needs. Meanwhile, they’ll use a different app to hail a ride.

About the author:

James Ledbetter is the editor and publisher of FIN, a Substack newsletter about fintech. He is the former editor-in-chief of Inc. magazine and former head of content for Sequoia Capital. He has also held senior editorial roles at Reuters, Fortune, and Time, and is the author of six books, most recently “One Nation Under Gold.”

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