Financially strained but still boasting users under the
It's a far more modest plan than the grand design X touted a few months ago
"We will launch peer-to-peer payments, unlocking more user utility and new opportunities for commerce," X said in a Tuesday
Understandably, X's rapidly changing business model invites much skepticism. Musk reportedly mused last week about
But payments industry analysts say X has the capability to leverage its vast base of enrolled consumers to stand up a P2P payments service. What's far from certain is whether X could turn a consumer funds transfer business into more lucrative commercial and lending opportunities.
X has not released details of how it plans to build a P2P platform, but the firm said last year it's amassing money transmitter licenses, which could create a framework for cross-border payments combined with its global social media reach. X reportedly has recently gained
Musk was a co-founder of PayPal (the name "X" was also attached to the internet bank he ran before merging it with another company, Confinity, to form PayPal). That early success in P2P payments means that experts shouldn't discount Musk's ambitions in empowering consumers already connected to X to exchange funds with one another, said Ariana-Michele Moore, an advisor in retail banking and payments with Datos Insights.
But building a P2P system in today's climate of high fraud risk would be extremely challenging, she said.
"You need scale and interoperability — in this case between consumers and banks. You also need a verification system in place for security," Moore said, noting that X so far has no such resources.
While statistics suggest X is popular with younger consumers, who are heavier users of P2P payments than other consumer segments, it has taken years for Venmo, Block-owned
"I'd say no, if asked whether X will be a leading provider of P2P a year from now, and that's not even addressing the revenue issues" that would require deep investment before X could hope to turn a profit on financial services growing out of P2P, Moore said.
P2P payments aren't a big moneymaker in and of themselves, said Aaron McPherson, a principal with AFM Consulting. "I think X's goal would be to establish accounts tied to the P2P payments, and then migrate to other financial services, such as high-yield savings accounts and perhaps buy now/pay later," he said.
With such a road map, X would be largely copying PayPal, McPherson noted. "But Musk was a co-founder of PayPal and probably thinks it was his idea in the first place," he added.
The tech billionaire wants the former Twitter's users to manage all of their finances on the site — the sooner, the better.
Another way X could develop a P2P network — and lean on PayPal in a different way — would be to embed an existing P2P network like PayPal's Venmo into X, so users could leverage their existing accounts, McPherson suggested.
While Apple already proved a tech firm can break into financial services with its
"I think it's harder to launch financial services now because there's more competition, which is why X might look instead to embedded finance as a strategy, rather than starting from scratch," he said.
Still, the ongoing growth and popularity of P2P surprised many in the payments industry.
"If you look at the roots of P2P, people have underestimated its potential all along," said Larry Berlin, founder and principal of Chicago-based Blue Point Advisory Services, noting that when Venmo launched in 2009 it was considered a novelty that appealed to a small subset of users.
Venmo proved the consumer value proposition of P2P, which Early Warning Services built on when it launched Zelle in 2017.
"I doubted whether Apple Pay would take off widely, and it took almost a decade, but it's a proven success with its own P2P capability [with
X's P2P concept would be going up against entrenched P2P players that have a long head start.
"One thing you can be sure of in payments is that for every success, there will be a lot of duds," Berlin said.
