BRAC Bank, one of the leading private banks in the country, announced Thursday that it is turning its digital banking app BRAC Bank Astha into a super app.
The company introduced a new iteration of the app and added a bunch of diverse features under the name Astha lifestyle that includes video and music streaming, online learning, online travel services, Islamic content, bill payments, shopping, and several other services.
A BRAC Bank press release on the launch explains that the app aims to turn it into a “lifestyle solution for BRAC Bank customers for all day-in and day-out from a single app.”
Naturally, the app targets some of the popular services that people consume digitally. From the press release:
“Astha Play – OTT Entertainment Platform with exclusive early access content, Astha Music – the largest music and podcast platform of Bangladesh with more than 1 lakh entertainment content, Astha Islamic – developed with Islamic services based on Quran and Hadith, Astha Learning – Bangladesh's first digital banking learning platform with academic and professional learning classes, Astha Travel – built for Astha Super App's travel solution.”
The super app is not a new concept to Bangladeshis. Dhaka’s tech ecosystem has been talking about super apps for a while now. Several companies made half-hearted efforts in the past with limited success. The largest telecom operation in the country Grameenphone has also attempted to walk that path and has since built a myriad of services into its MyGP app. Although GP never publicly stated its ambition to build a super-app for GP customers, GP’s experience in this regard will be interesting to look into. Similarly, Banglalink, the third largest telecom operator in the country, has also been cooking things around this idea.
But what a super app exactly is and why BRAC Bank is interested in a super app?
As the name suggests super app is an app that can help you do multiple things within a single app. You can order groceries, you can watch videos, learn stuff, make payments, buy tickets, and so on. From A16z:
“In brief, a super app is an application that builds upon its core functionality to mix and mash a bunch of seemingly unrelated services — but ones the user would need or want to do anyway — into one place. Imagine a single app that allows you to shop for groceries, pay your rent, review work documents, refill prescriptions, book a trip, and chat with friends, interest groups, and businesses — that’s a super app.”
All super app discussion usually leads back to China’s omnibus app WeChat. Many people call WeChat the operating system of China. You can do everything from texting your friend to buying groceries to making payments to everything in between.
China has a second super app from Alibaba called Alipay.
One prominent feature of Chinese super-apps is that the core features appear to be the payment and other daily necessary features that connect other features and services.
Indonesia’s GoJek has also built a successful super-app on top of its ride-hailing success with various additional services.
Singapore’s Grab is another example of a Superapp where you can find many different services in one app.
In Bangladesh Pathao and Shohoz have tried to build versions of super-app with services as diverse as rides to food to medicine to ecommerce to payment.
Pathao’s attempt was almost succeeding until the company came to face a series of misfortunes first with its Pathao Pay and then with investments.
Several people I spoke with from these companies in the past told me that building a super app was/is not easy. While it appears an exciting idea on paper that you can easily sell more services to your existing users, execution is not that simple. It is expensive and hard work. Obviously, Pathao and Shohoz were inspired by the successes of GoJek and WeChat.
Superapps are built on several assumptions. One central assumption can be explained using the aggregation theory of Ben Thompson. Aggregation theory suggests that the internet allows aggregation of both demand and supply at almost zero marginal costs. Thompson explains aggregators using several layers. The most important aspect however is demand aggregation. If you have enough demand for your service, it can help you create a virtuous cycle. Once you have demand power, supply is bound to come to you. Since you can serve almost infinite demand on the internet, successful aggregators get more and more powerful over time. Almost all successful internet companies such as Google, and Facebook have some of these characteristics. But how does aggregation theory explains supper-app?
Supper-app is also about demand aggregation. The idea is that if you have a bunch of users who use your app daily. Your app has some stickiness and now you see you can offer these same users more services that they need — related to your core service or otherwise.
Once you have built one successful service on the internet, the scale potential is infinite. At least, in theory. Moreover, the larger your demand aggregation grows, the more power you gather. Now you have a loyal base of regular users. For instance, they buy groceries from you. You think, well, these people also need medicine, why not I sell them medicines as well? They will come for groceries and buy medicine or come for medicine and buy groceries. You also assume I can cross-promote these two products. For people who buy groceries, I’ll show them medicine ads. The ones who buy medicine will see grocery ads. It will reduce my marketing budget. It will give my users one more reason to stick with me and so on.
But when you get to execution, it is a different story. Everything is a tradeoff. Opportunity costs are everywhere. And execution is expensive. More importantly, your grocery users probably don’t want to buy medicine when they are buying groceries. These challenges eventually arise. But the challenges and tradeoffs of the super app are an entirely different discussion.
For the sake of our discussion today, the thesis for the super app makes a ton of sense. It has worked in some markets. It should work in Bangladesh as well.
But Brac Bank is an interesting case when it comes to building a super-app and I believe BRAC Bank’s motivation for building a super-app comes from a completely different place. More on that in a moment.
On a side note, I think the most likely candidate to become a super-app in Bangladesh is BRAC Bank-owned MFS player bKash. bKash has not made any official announcement in that direction but the company is well-positioned and has gradually been leveraging its position to get there.
BRAC Bank’s move to turn its digital banking app into a super app is apt. Banks in several other markets also eyeing similar strategies as they transition to an increasingly digital world. However, I think BRAC Bank’s motivation comes from a different place. Let’s try to decode it.
A growing number of customers today prefer digital banking over in-premise banking. This rise reflects in the rise of internet banking in Bangladesh over the past several years. This group of customers prefers a bank that offers the best digital banking service. Several private banks in Dhaka have been looking to attract this growing customer base. Almost all banks have launched some form of the digital banking app.
BRAC Bank launched its digital banking app BRAC Bank Astha about two years ago. Google Playstore suggests the app has over 100k downloads with a 4.5 average rating. That’s a good rating for a banking app. As I mentioned earlier, banking has been moving to digital, fast.
BRAC Bank Astha is one of the finer digital banking apps in Bangladesh. Banks are not tech companies. Naturally, most digital banking apps are subpar. To that end, BRAC Bank Astha enjoys a better user review. Users can do almost all their banking with the BRAC Bank Astha app. Like all the digital banking apps of other banks in the country, the app has its limitations but it does the job. With this new iteration as a super-app Brac Bank has added an additional layer of services to the Astha app called Astha Lifestyle. And BRAC Bank is the first bank to position its digital banking app as a super app.
The customers BRAC Bank serves are mostly urban middle and upper middle class. This is the group that is adopting digital banking faster. BRAC Bank aims to not only keep this group of users it already has but also want to attract more of them.
The bank makes this part of the strategic thinking behind the launch apparent in its press release:
“In less than two years, BRAC Bank Astha app has evolved from a Digital Banking App to a Digital Convenience Platform. The bank's aim is to drive disruption in digital banking and enhance customer experience.”
BRAC Bank saw an excellent adoption of its app. The bank says:
“Last year, the bank's growth trajectory in digital banking was almost three times faster than the overall industry in the country. During this time, BRAC Bank Astha App's annual digital transaction volume stood at BDT 33.5 thousand crore, and total digital transactional counts have reached to almost 9 million mark.”
The new iteration and positioning aim to capitalize on the growth and move further. The strategic goal is to encourage Bank Bank users to use the app more often and transact from the app when buying various necessary services. The expectation is to increase earnings from existing customers. If customers can do more things using the BRAC Bank Astha app, they will do it and they will probably pay using their BRAC Bank account.
The second goal I think is to improve retention. Customers who prefer digital banking are and will be different from the customers who are used to offline banking. Digital customers will not hesitate to switch their bank if they don’t like the experience. To that end, a useful and well-made app should help BRAC Bank to maintain retention and give its existing users another reason to stay. This could come as a competitive advantage for BRAC Bank as the heat rises in digital banking and customers gradually seek superior digital banking experience. Now with a super app where users can also watch TV if they want to, it gives BRAC Bank users one more reason to stick around.
The opposite side of this story is that offering an excellent digital banking experience can help BRAC Bank attract new customers. Tech-savvy customers who prefer smooth digital banking services will be tempted to check the app out.
One of the key investments banks needs to make is in the physical infrastructure. It is expensive to serve an offline customer when he/she visits. You need to maintain all these infrastructure and people. Compare to that, serving the same customer online is less expensive and far more profitable for a bank. To that end, investing in an app that would encourage more of its users to transact digitally and also attract new users is a worthwhile investment. When you see from this lens it makes perfect sense.
That said, while the benefits of launching a super app on top of your digital banking app are apparent, there are challenges as well.
None of the services in the app, except for its banking services, is proprietary. Brack Bank partners with other industry players to provide these services. This is not usual for a super app. WeChat does it. Grab does it.
The challenge for BRAC Bank is that except for the banking services, which is again not a daily necessity unless you make all your payment using your bank account or BRAC Bank aims to get there for its users, all other services will either be provided by a third party or BRAC Bank will commission the delivery of the service. For instance, it can produce movies for its streaming service. But the BRAC Bank says the app is only for BRAC Bank users which limits its ability to take the app to everyone unless BRAC Bank aims to become the digital bank and go big. To that end, investing in content and other areas just for BRAC Bank users don’t sound like a solid strategy.
Second, one response to BRAC Bank’s move will be that many other banks will seek to offer similar services in their digital banking app eroding BRAC’s differentiation. Moreover, since BRAC bank will essentially be working with other partners, real differentiated services will be difficult. Because BRAC Bank Astha is a service aggregator. Being a bank that deals with a different level of trust issue, BRAC will not be able to add anyone to their app.
On the other hand, partnerships might prove challenging for substantial services because many partners may see the disintermediation by BRAC Bank as a potential future challenge. Initially, many partners may see it as a distribution channel for their services. But BRAC Bank eventually has to find a model to host all these services into its platform, if it does so. It can happen so that BRAC Bank merely add the icons of these services on its app and when customers click, it takes them to the website of that particular service. If this is the case, it will reduce the relevance of BRAC Bank’s app.
Similarly, while theoretically cross-promotion of services and products is a lucrative idea and aggregation makes sense, often demand aggregation is a much more powerful strategic upside than merely aggregating more services on top of your core service. Demand aggregation is essentially having a ton of customers who buy from you or want to buy from you. Excellent demand aggregation for one product might not work for another because of the context. As we discussed earlier, a grocery customer might not want to buy medicine in the same breath.
In the case of BRAC Bank, customers go to the BRAC Bank app for banking services. An ideal extension of that would be anything financial or probably shopping as well. Since my money is there I can spend that for buying something. But beyond that, I might find other services as just space filler. Because for many of these services, I probably have other dedicated apps. For instance, why should I watch TV series on the BRAC Bank Astha app while I have Netflix or HoiChoi, and Youtube on my phone? Similarly for other services as well, there are dedicated learning apps and platforms. Naturally, those dedicated platforms will provide a much better experience than the BRAC Bank Astha app because they are only doing it.
The common reasoning people use when it comes to aggregating more services on top of other services is that since 100k people already use my app for calling cars, they use my app daily, so it makes sense for them to use it for their other needs. Now they have other needs in their daily lives. They need other services such as grocery. So I’ll add that to my app and cross-sell. This framework works. As we discussed, the Internet allows aggregation on both ends — demand and supply. You can sell to as many people as you can afford to manage. And you can many more services in an app. But merely distribution is not the end of a service.
App probably makes it easier to aggregate both demand and supply but when it comes to the execution you still have to go through all the nitty-gritty details. Whether your customers who use your app for ride-hailing want to buy groceries from your app, whether you will be able to provide an optimal service to your customers in grocery delivery, and so on. These considerations sometimes can get pushed away for the sake of launching something exciting.
The other challenge for BRAC Bank and similar organizations is the longevity of interest in something. BRAC Bank will remain interested in digital banking but the super app, might not be something the bank will be wanting to do after a few years. A neobank, a digital bank, makes sense. But something outside of that can easily turn into a burden for an organization like BRAC Bank.
Large successful organizations lose interest in small projects pretty quickly because these things take a long time to grow, which these large organizations find not that helpful and that eventually leads to fatigue and discontinuation. We have seen this repeating across sectors. In telecom, several players have tried various things just to give up eventually.
But when something aligns well with your core strategic ambition, it is more likely that you will stick with it. You will see through it. To that end, BRAC Bank should probably focus more on convenience and unique services that its customers can't find anywhere else and that have some sort of connection with its core financial/banking services.
These are merely speculations. It may turn out that BRAC Bank becomes the most important banking plus super app. It is refreshing to see a private bank launch a product like BRAC Bank Astha and plans to get into the super app and similar strategies.
As we discussed, BRAC Bank has done a good job with the earlier version of its digital banking app Astha. It has been just a few years. The company now looks to build on it. The move to build a super app for its users makes a lot of sense as a narrative and it is an exciting one. But we will have to wait for a year or two to see how it plays out in action.