Can Elon Musk's X create a financial super app in one year?

Nathan Laine/Bloomberg

Elon Musk's plan for his second year at X, formerly known as Twitter, includes making the site a diversified financial powerhouse that sidelines banks, placing X in the race to build a super app that grabs share from traditional banks by cross-selling financial services to a large enrolled base of existing users.

If he succeeds, it would be a reversal of the trend of Musk's stormy first year, which was highlighted by a series of controversies, massive job cuts and a plummeting valuation from the $44 billion deal price to about $19 billion.

In a companywide town hall last week — reportedly his first since buying the company — Musk gave employees a one-year deadline to create a mix of services that will manage X users' "entire financial lives," so they "won't need a bank account," according to a leak of the company meeting to the technology site The Verge.

It's an uphill climb, but not necessarily impossible, according to fintech experts.

How would 'X bank' work?

Given the regulatory challenges, it's very unlikely that X will become an actual bank. Most likely, it will offer a payment product that will tap into X's large user base, providing easy user verification and a stream of data. That will make X attractive to regulated financial services partners, placing it in an advantageous position in negotiations with those partners to offer digital financial services or to serve as an enrollment source for lending, wealth management or other more sophisticated banking services. 

"Generally, tech companies are averse to the regulation that comes with launching a full-service bank, and so they try to focus on a more limited product set," said Aaron McPherson, principal at AFM Consulting. "If X focuses on e-commerce and wallets, it would be more likely to succeed than if it tried to replace banking in general."

Nonbank firms with reach, resources and entrepreneurial DNA can deliver a range of payments and financial services, according to Eric Grover, a principal at Intrepid Ventures, noting Apple, PayPal, Block, Netspend, Chime, Amazon, Meta and Stripe are among the large fintechs or general technology companies using payments as a foundation for offering fee-generating financial services. 

"But these firms partner with banks and in many cases have state money-transmitter licenses," Grover said. "Fundamentally comparable financial services should be subject to the same regulation, and while it's not perfect and there are opportunities for regulatory arbitrage, X will have to get licenses and partner with or own financial institutions." 

Scale will be a big part of X's appeal. The website's user numbers are declining but still massive. It has about 353 million users, down from 368 million in 2022, its record high, according to Statista.  

"X is just a payment credential away from being a viable player in financial services, even with the erosion of its user base," said Richard Crone, a payments consultant.

X's "Not a Bot" project — wherein it assesses a small fee to users to prove they are legitimate humans — is a key strategy that could boost X's financial services, Crone said. "Not a Bot" is being tested in the Philippines and New Zealand. The $1 annual fee gives participants posting and interaction capabilities. 

"'Not a Bot" introduces positive user authentication through payment credentials," Crone said. "Advertisers can benefit from an enhanced attribution audit trail backed by authenticated users because authentic users translate to more precise ad targeting, engagement tracking and analytics."

The new subscription method also doubles as a foundational step toward a possible "X Wallet," Crone said, adding that the authentication groundwork offers a springboard for diverse financial utilities such as P2P transfers, cryptocurrency and other integrated financial services. Localized, cost-effective "pay by bank" payment systems could also be piloted in the Philippines and New Zealand.

While Musk's commentary during X's staff town hall could be viewed as internal brainstorming, he also said X planned to roll out a suite of financial services during 2024 and it would "blow my mind" if this was not done by the end of 2024. 

Payments

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X has made some formal moves toward financial services since Musk acquired the company.  In November 2022 Twitter applied for a money transmitter license with the Financial Crimes Enforcement Network as Twitter Payments LLC. That license, which has not yet been granted, would allow X to offer P2P transfers and other basic payments. 

During X's recent employee town hall, Musk said: "When I say payments, I actually mean someone's entire financial life."

According to Musk, that includes "securities" and all manner of money management, not just "sending $20 to a friend … I mean, you won't need a bank account."

An uphill battle

Musk, one of the founders of PayPal more than two decades ago, criticized PayPal for not going deeper into financial services. PayPal formed from the 2000 combination of two companies: Confinity and X.com, the latter of which was an online bank run by Musk. 

PayPal had a full product road map in 2000, Musk claimed, but did not fully follow through, and is now a "less complete" company than it was in the past. If X were to build a financial super app, PayPal, which uses a large enrolled base of payment credentials to cross-sell other services, would be one of Twitter's primary competitors. PayPal and X did not provide comments for this article. 

"Dating from his days at [the old X.com], Musk had ambitions to be the primary provider of payments and financial services to consumers," Grover said, reiterating X's need to work with fully regulated banks, noting Marqeta works with multiple banks including Evolve Bank and Trust and First National Bank of Omaha. Block owns an industrial bank license and issues the Cash App card through Sutton Bank.

Twitter in the past has offered financial services, but these efforts often drew criticism or resulted in failure. Twitter's "tip jar," which allows links to third-party payment sites, was criticized on privacy grounds. Twitter phased out an earlier BigCommerce-supported "buy button" in the late 2010s, with Twitter saying it was deemphasizing e-commerce. Twitter was also hit with a large cyberattack in 2020 that compromised some user accounts. Today, X allows content creators to charge subscription fees.

"There is a lot of competition, and X does not have the scale of Meta or Google," McPherson said. "I don't doubt that they could launch a service, but it does not seem particularly to X's core function, which is messaging."