Super apps set to supercharge digital growth in Southeast Asia

Singapore’s Anthony Tan and Indonesia’s Nadiem Makarim have much in common.

Both in their mid-30s, they secured Harvard MBAs before going on to stunning success as founders of Southeast Asian ride-hailing apps. Tan’s Grab and Makarim’s Go-Jek are the region’s first, and so far only, decacorns – startups valued at more than $10 billion.

The one-time Harvard friends, now rivals, are today focusing on a new vision: creating a super app for Southeast Asia. If the term brings to mind Uber or Instagram, think again. Born in China, the super app is also known as an “everything app”. It’s used for messaging friends, ordering food, hailing cabs, paying utility bills, booking hotels, buying cinema tickets and more.

WeChat and Meituan-Dianping are China’s biggest super apps. Together, they reach nearly 1.5 billion people per month and each has revenues in the billions of dollars.

Southeast Asia is ripe for becoming the next super app breeding ground. This is a dynamic region hurtling toward middle-income status, with an unbeatable appetite for instant digital gratification. The energies unleashed by fierce competition promise to supercharge Southeast Asia’s digital economy, expected to exceed $240 billion by 2025, according to a Google report.

“We see this world with the rise of millennials and they want everything now and they want it immediately,” Grab’s Tan told the New Economy Forum in Singapore last year.

Super apps normally start by providing one core service that goes viral before adding more functions. Scale is critical because of razor-thin margins. Southeast Asia’s huge, unsaturated digital market offers the scale necessary for platforms that rely on massive transaction volumes to turn a profit.

Importantly, Southeast Asia’s consumer resembles the Chinese consumer of five years ago, when China’s super apps achieved critical mass. The region features millions of new Internet users who enjoy disposable income, yet remain largely unbanked, and first came online through a smartphone and not a PC.

Like China’s up-and-coming, Southeast Asia’s consumers are eager to taste the fruits of consumer culture, yet do not have the entrenched platform loyalties of Western consumers. The super apps have a transaction-based model – in which a minuscule cut goes to the platform for every transaction rather than the ad-based revenue models of Facebook and Google.

Meanwhile, Southeast Asia has become a creative crucible for tech startups. Venture capital investment in Southeast Asia tech startups reached $3.4 billion in the first half of this year, according to Refinitiv, triple the amount from the same period one year ago.

Companies such as Singapore video streaming service Hooq, on the Grab platform, and Indonesia payment processor Kartuku, recently acquired by Go-Jek, are a pipeline of new services that can be hosted on the region’s super app platforms.

There are however challenges on the path to super app ubiquity in Southeast Asia. The region’s countries share much common ground, but cultural, social, economic and particularly regulatory differences raise questions about whether China’s super app experience can be replicated in Southeast Asia.

China became a global fintech leader by pioneering easy mobile payment systems. They succeeded because of an enormous common market – and eager support and regulatory backing from the government.

Cheap and easy transactions across borders are a critical task that Grab and Go-Jek will need to address, possibly with a blockchain payment system. Southeast Asia’s splintered digital payment framework means they currently need to cut deals with local payment platforms or turn to Visa or Mastercard, seeking rates that won’t turn off consumers. Yet solutions should be within reach.

How will the rivalry between Grab and Go-Jek play out? The only certainty is that their creative competition will be a spur to extraordinary digital growth.