Gold and the rise of the “super app”: how fintechs can turn gold investing into a consumer service
Multi-billion pound valuations for startups often grab the headlines, but how many of them are actually profitable?
With the Covid crisis placing more emphasis on sustainability, some of the top tech and lifestyle companies have yet to break even. Take Uber for example: the ridesharing app that revolutionized the taxi industry lost their life $ 3 billion in 2018 and $ 8.5 billion in 2019. Airbnb, an equally famous startup that disrupted the hospitality industry, suffered losses of 4.6 billion dollars in 2020. While both companies are seen as massive successes, they will eventually need to become profitable in order to continue to exist.
With global economic downturns and prolonged lockdowns in many parts of the world, the companies in the financial sector that were able to win were fintechs that provide a market for services to the consumer.
Starling, a digital challenger bank, is a perfect example. The company has recorded profitability this year and revenue climbed 600% thanks to the scope of its service offering, in particular an acceleration of credit to SMEs.
Revolut, another digital app that rivals traditional banking services, has also been successful in moving money around the business by expanding its services to include trading in stocks and cryptocurrencies. In fact, the increase in the value of the crypto, which Revolut supports through its trading features, has resulted in a windfall of nearly £ 40million for the company. The expanded product offering helped boost its overall prosperity for the year.
These examples describe an important growth strategy for other fintechs to consider: the need to become a “super app” to drive consumer acquisition and retention in a highly competitive industry.
But what exactly is a super app? Indeed, a super application is a platform that provides several services, becoming a self-contained and comprehensive portal to a wide range of products so that the consumer does not have to switch from one application to another.
Emma, the budgeting app which just secured over £ 3million in funding, recently expanded its service portfolio to include free stock transactions, crypto, P2P payments, high interest savings accounts, and credit scores.
Revolut and Starling have taken similar paths to become sustainable and profitable: they start with their core offering, then expand their services to support their original product.
But when it comes to fintech, building a great app requires an investment in integrated finance. Integrated financial operators allow fintechs to plug in the products and services they want to offer their customers without having to do the construction work themselves.
Apps that get the most out of integrated finance then have the potential to upgrade to super-app status, offering a wide variety of fast and easy-to-use services. With built-in financing powering the apps they use, consumers can transfer money overseas, apply for a mortgage, or purchase insurance, all in one app, without having to switch to another. The app becomes a multi-faceted market, rather than a single service offering.
So, as fintechs seek to expand their product line, sooner or later they will have to come up with alternative wealth and investment products. We have seen that adding gold to their product is a matter of when, not if. For example, Revolut recently added physical gold to its product offering. And the recent implementation of Basel III pushed the industry towards physical gold rather than gold-backed derivatives, and demand for the safe haven metal increased 40% from 2019 to 2020 amid global volatility and uncertainty. In London alone, £ 4.5 billion of gold is traded every day.
This is why we, Goldex, a startup of allocated physical gold, have broadened their product offering from retail investors to businesses. As a multi-trader marketplace, we recently launched a simple business integration for financial companies. Through a plug-and-play connection via API or FIX, apps like Revolut and Starling – or any other fintech with super app aspirations – can offer their customers access to the best prices on physical gold 24 hours. 24/7.
Goldex’s pivot towards B2B integrations allows us to capitalize on the huge demand for allocated gold from fintech and integrated finance operators.
So, as fintechs around the world increasingly turn to the super app model, it’s clear that more and more companies will be thinking about how they can integrate multiple services together. In order to harness the full potential of their growth, services that offer investments such as crypto or gold could become the forerunners of the fintech industry and maintain their competitive edge.
Competition in the super apps space is global. Companies are looking for geographic dominance and expansion of their product offering. With the Covid accelerating digitization, it is no longer enough to be a leader in one region, it is necessary to be present in several. Fintechs and super apps need to appeal to everyone, everywhere, so that they can successfully launch into new regions and be everything to everyone. This explains why we see so many fintechs rushing to expand their range of services. It also highlights why investing in gold – a traditional and archaic practice being modernized and democratized by people like Goldex – is a staple on the roadmap of fintechs and the super apps they aim to become.
Sylvia Carrasco is the Founder and CEO of Goldex, the fintech gold market solution. Goldex is already working directly with fintechs to become the most convenient option for allocated gold, creating a product that so far has no direct competition. Matching the pace of a fintech’s ambition, apps can deliver allocated gold to their users within six weeks.
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