The Asian Tech Trend Disrupting Central America

October 27, 2020

Super apps were born in the bustling streets of Asia, where economies and populations grow faster than traditional infrastructure can keep up. The response of tech-savvy young people in places like China and Indonesia was to turn to their phones. Super apps offer a range of convenient services, from food to fintech, that help users avoid some of the hurdles the region’s poor roads, banks and hospitals put in their path.

Little surprise then that the first super app in the Americas should surface in Central America. While not as crowded or as large as south-east Asia, it shares many of the same characteristics. There are plenty of countries, packed into a small region, with young populations and creaking infrastructure. Now a new super app, OMNi, looks set to help people in Central America and the Caribbean overcome challenges from insecurity to inadequate health systems. That’s good for locals and is also promising for investors as it means the app’s services will have rapid uptake.

A young, dynamic region

OMNi’s target market is the Central American isthmus, of Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama, plus major neighbouring islands, Jamaica and the Dominican Republic. It’s a region with more than 62 million people and a working age population of 45 million. Just like south-east Asia, it’s a young region. Take Guatemala, Central America’s most populous country. Half of all Guatemalans are under 19 years old, making it the youngest nation in the Americas. By 2050, Guatemala’s population will have more than doubled to almost 50 million. Similar demographics are found across Central America. Expanding populations drives economic growth, so investors can expect demand to grow across the region. The fact that Central Americans are so young is another plus as it means more people entering the workforce and less dependent citizens per worker. But perhaps most importantly, young people have a different attitude and are more open to new solutions, such as OMNi, to old problems.

The fact there are so many countries crammed into the region is a positive for OMNi and one of the main reasons a super app model makes sense in the region. Individually they are small markets where OMNi is unlikely to face local competition – yet because they share similar culture and challenges it will be easy to build scale. Put simply, much of what works in Guatemala will also work in other countries on the isthmus, allowing OMNi to quickly scale up. It began in Costa Rica in 2019, where it is already the nation’s most downloaded app. And the core fintech services will be rolled out to all the other countries in the region in 2020 and 2021. But OMNi will decide which additional services are most relevant to each country. For example, perhaps electric scooter hire makes sense in Costa Rica but not in El Salvador. Meanwhile an English-language version is being rolled out for Jamaica and some of the Latino diaspora in the US that send remittances to Central America.

OMNi can offer, and quickly disburse, microloans to poor Central Americans that would never be able to borrow money from a conventional bank…

This regional expansion will be supported by the fact there is already an integrated telecoms market in Central America that offers high-quality, low-cost mobile data. The main players, Claro, Movistar and Tigo, offer free roaming to their customers across the region. That means OMNi users won’t have to change handsets or sim cards as they cross borders.

Central America is also starting to benefit from a number of positive structural changes. Over the last decade it has cut its reliance on imported fossil fuels and now runs on renewable energy. Costa Rica is the only country in the world to power its grid with 100% renewable energy, while Guatemala gets 70%, mainly from hydro, and Nicaragua is on 50% and rising fast. Another big change has been its exports. Twenty years ago, half of Central American exports were commodities, but now more than 75% is made up of manufactured goods. Beginning with the 2005 Cafta-DR trade agreement with the US, the region’s factories have steadily been incorporated into North American supply chains. That trend will accelerate as the Americas decouples from China’s economy in the wake of the trade war and coronavirus tensions.

New solutions to old challenges

Of course, Central America is not a paradise. Violence, inequality, unemployment and poor infrastructure blight the lives of many of its citizens. Fortunately, OMNi can mitigate those problems. Let’s start with security. OMNi’s ride hailing service is far safer than traditional taxis, which are notorious for taking passengers to forced trips to the cash machine in ‘express kidnappings’. Likewise, its cashless bus journey system will remove one of the most common petty crime risks, while its QR payments does the same for shops. The underlying concept of OMNi is to replace cash with digital money spent within the app and that reduces scope for robbery.

Then there is unemployment. By facilitating payments for services such as ride hailing and food delivery, OMNi is boosting the economy and creating jobs. It allows Central Americans, who are often shut out of the limited local formal job market, to become self-employed drivers and delivery drivers. Indeed, by bringing cutting-edge technology to these typically low-tech industries, OMNi is boosting productivity. And it’s not just the young that will benefit. Inadequate public schools mean that many taxi drivers and delivery people missed out on a good education. Yet the app can train older workers in the latest global best practices. It will also boost entrepreneurship as OMNi’s cheaper point-of-sales solution, with a QR system that will eventually give small vendors a free alternative to the current expensive options, lowers the start-up costs for new businesses.

Healthy demographics and positive structural economic changes guarantee strong GDP growth in Central America over the coming decade…

Indeed, fintech is the most transformative service that OMNi offers. Banking penetration is too low in the region. For example, in El Salvador only 30% of the adult population have a bank account. Yet OMNi will bring financial services to people who ordinary banks can’t reach. Because it can access customers through their phones unlike traditional banks that have to operate expensive branches, OMNi has a low-cost route to even the poorest Central Americans. Indeed, customers can get a debit card in just 12 clicks, which is even faster than Revolut. Moreover, the wealth of data it gains from each user will allow it to assess credit risk, without asking for burdensome paperwork. As a result, OMNi can offer, and quickly disburse, microloans to poor Central Americans that would never be able to borrow money from a conventional bank. That will help to reduce inequality as it allows poorer people from the informal sector to access financial services for the first time.

One shared trait between super apps in Asia and Central America, is how they allow citizens to ‘leapfrog’ stages of development. For instance, during the 20th century Central America never developed a public transport metro, like you see in the UK, yet by offering electric scooter and bike rental, OMNi gives a 21st century solution. These low-carbon transport options are particularly needed in the region’s congested cities, while the single-user element makes it ideal during a pandemic.

Healthy demographics and positive structural economic changes guarantee strong GDP growth in Central America over the coming decade. That means there will be more people, with more money looking to solve the traditional problems caused by the region’s creaking infrastructure. They will turn to tech solutions like OMNi, which offers new ways for young Central Americans to travel, eat, borrow and spend.