Payments and X 💳
X plans to become a payments company in 2024. Can it succeed?
In a blog post on January 9th titled Transforming the Global Town Square X said 2024 will be the year it really starts fulfilling Elon Musk’s goal of becoming “the everything app”.
In a discussion with ARK’s Cathie Wood at the end of 2023 Musk unveiled plans to introduce payments to X. According to him, all states have approved licenses for the company, with the unfortunate exceptions of New York and California.
2023 was foundational for X, and 2024 will be transformational. - X blog post.
X in 2023 & 2024
The blog also outlines the achievements of X in 2023 which include:
Evolving a content moderation strategy to support free speech.
Developing Community Notes to combat disinformation.
Many improvements to video content posted on X.
Monetization for creators.
X claims it shipped more products in 3 months than Twitter had done in the prior 3 years. It’s a claim that’s hard to verify since it’s difficult to know what they class as a “product”.
But no matter what you think of Elon Musk, the amount of improvements made to the platform, has been impressive, more so considering it’s been done with a workforce just 20% - 30% the size.
But 2023 certainly wasn’t all plain sailing for the platform. There were platform outages, concerns over imposed post-viewing limits and worries about bad actors using X to spread disinformation.
But given #goodbyetwitter was trending at the end of 2022 and that 80% of the company was laid off, 2023 must surely be seen as a success for X. What’s in store for 2024?
According to X’s recent blog post, its goals for 2024 are:
Further improving recommendation, search and ad functionality using AI.
Creating more content via partnerships with creators (agreements with Tulsi Gabard and Don Lemon are early signs of this).
Improving platform safety and user verification.
Launching peer-to-peer payments.
The most game-changing of these for the platform is undoubtedly the latter.
But why exactly is Elon Musk so intent on X entering the payments market given its competitiveness and complexity?
Why Do X and Elon Want to Move into Payments?
Ever since Musk joined Peter Thiel et al to create Paypal in March of 2000, payments have been on his mind.
It comes down to his commitment to building what he calls the everything app. Something he envisions as being the only app you need on your phone, an app that transcends social media, payments and gaming and becomes a conglomeration of all three and more.
Much like WeChat in China, Musk wants X to become something that people use every day for everything. Payments and social media are of course integral to any such app.
Add to this the fact that the payments market is expected to grow about 12% a year to $18 - 24 trillion in 2030, up from $10 trillion now, and it’s easy to see why Musk wants X to enter it. Despite tough competition, there’s enormous potential to make money and use payments to further push X’s appeal as the only app you need on your phone.
Can it Succeed?
Details about exactly how the payments system will work are difficult to find at the moment and there are still regulations to be cleared and licenses to be granted.
Speculation around crypto being integrated into the platform has been rife. Musk has been a long-time advocate of the industry (there have even been studies into how his tweets can impact crypto prices) and has had an outsized impact on the price of crypto through his use of X, then Twitter. He’s recently been rather quiet on that front though and his seemingly more pragmatic approach towards the platform he now owns suggests that crypto may not be at the forefront of X’s move into payments.
What’s less well known than Musk’s love for crypto is that similar social media apps for peer-to-peer payments already exist. One of the most popular is the decentralized social media (DeSo) platform, Diamond.
The platform has its own native currency, $DESO, creators can also make their own “creator coins”. Other users can buy these creator coins to support the creator; the price of them changes according to supply and demand. The more people like your content, the more that will buy your token.
Tokens can also be donated directly to people from their posts. You just click the diamond highlighted in the image below and select how much to give to the creator. A direct payments feature like this would be amazing on X and would make donating easier as well as making it easier for large accounts to run competitions with giveaways. Mr Beast would certainly be pleased!
So, even if it’s not mainstream, there is already a platform that combines payments and social media. Given how big X already is, and Musk’s prior success in both payments and disrupting incumbent industries, there doesn’t seem to be much standing in the way of it becoming a payments company sometime in 2024.
Perhaps regulators along with a dislike of Musk amongst some people will pose an issue, but this hasn’t stopped Tesla from becoming far and away the world’s most valuable car maker.
The exact release date of the payments feature hasn’t been announced yet but Musk has said it could be as soon as mid-2024. Of course, anyone who’s even remotely followed him over the past decade will know how notoriously bad his predictions are; products often end up being released several years late.
The impact on other payments companies and banks would be huge if X can grow to the size Musk is undoubtedly aiming for. It will be difficult given his polemic nature and the controversy that he seems to love but it’s certainly possible if the platform can offer enough to users.
Musk has said he believes X payments could bring in about £1.3 billion by 2028, X’s total revenue in 2023 was about $3.4 billion. He also hopes to have about 930 million users on the platform by then, up from about 556 million today.
An ambitious goal no doubt but one that will scare fintech start-ups and legacy banks alike given his prior success in becoming the leader in hard-to-disrupt industries.
The transformation of X into a payments company is a significant shift in its direction. By leveraging its existing customer base, technological infrastructure, and brand reputation (amongst some), the company could make a substantial impact in the payments sector and take market share away from the present incumbents.
The move would also help diversify X's revenue streams away from advertising and subscriptions and enable it to offer more comprehensive services to its customers.
It will be fascinating to observe how X’s foray into the world of payments influences not only its future, but also the broader dynamics of the wider financial services ecosystem.