Will Elon Musk’s X take over financial services? Don’t hold your breath

Advisors raise a collective, skeptical eyebrow as billionaire goes where many other Silicon Valley companies have already tried and failed.

The rebranding of Twitter into X was about more than just the name, according to Elon Musk, the company’s billionaire owner. Over the coming months, the company will evolve beyond microblogging to include “comprehensive communications and the ability to conduct your entire financial world,” Musk announced.

Musk promises that X will be the most efficient database for money. Oh, and it will have the least amount of fraud, and everything will be in real time, too.

“Over time, it would become, I don’t know, maybe half of the global financial system,” Musk said in a video. “Or some big number. I’m not sure what the number is, but pretty big. It would be by far the biggest financial institution.”

Right, sure. Believe that when tweets can fly.

Or is it Xes? No one is quite sure what to call posts on the website anymore because this entire rebranding exercise has been botched from the beginning. The company made the switch without even first securing the “@X” username or the www.x.com website address (though it now owns both). X’s own “about” page still refers to it as “Twitter.” Indonesia even banned the app as a part of its anti-pornography laws.

“Throwing away one of the most recognizable brands on the internet and trying to spin it into a financial service app seems like a waste of forty-four billion dollars,” Jonathan Ford Jr., president of JFJ Advisory Services, said in email. “Musk has stated the company is cash flow negative, advertisers are leaving, and X continues to place restrictions on these brands, further alienating them. I don’t see how enabling people to bank on the app helps reverse the shift in the X/Twitter image that drove these advertisers away.”

Yet this is the company that will successfully build a competitor to WeChat, the Chinese texting app that is now used by more than a billion people to transfer funds, pay for goods and services, and borrow money?

Many other Silicon Valley companies have already tried and failed to enter financial services. Facebook abandoned plans for Libra, a cross-border payments product, after regulatory scrutiny. Google nixed a financial planning product that reportedly had 11 banks lined up as partners, according to Bloomberg. In 2018, Amazon was reportedly in talks with JPMorgan Chase to launch a “checking-account-like product” while Microsoft partnered with BlackRock on retirement planning. Neither project has borne fruit.

The closest any big tech company has gotten is Apple, which launched its Apple Card credit card and a related app in 2019 with Goldman Sachs, but the investment bank is already looking to get out of the business.

Yet X — which has reportedly lost 50% of its advertising revenue since Musk purchased it for $44 billion in October — is the one that will get it right? The company that’s seen ad-portal traffic fall 20.6% in June, according to Similarweb, and overall traffic decline steadily since January, as CBS News reported?

Even if Musk and his “everything app” were to release a product successfully, how much market share would it be able to attract from existing players? Traditional financial institutions have invested aggressively to build a single digital platform to handle all a client’s financial needs, but none have fully gotten there yet. And even as fintech startups like SoFi, Wealthfront and Betterment continue growing the ways they can serve their customers, they haven’t toppled the existing industry after more than a decade of being on the market.

[More: SoFi has built a fintech juggernaut, and it’s time advisers started paying attention]

“It’s unclear to me that Americans want a single app where [they] can do social media, call a car, book airline tickets, pay bills, etc.,” Charles Thomas III, a financial advisor and founder of Intrepid Eagle Finance, said in an email. “Time will tell whether Americans want a centralized solution or want to continue with individual apps for individual services.”

To be fair, Musk may have some advantages that others lack. To start, he does have experience in the fintech space, having founded PayPal — formerly known as, you guessed it, X.com — before selling it for a fortune to eBay. Perhaps this background and his personal wealth could help Musk deliver a “super-app” faster than an existing financial institution or fintech.

“Unquestionably, I would say Elon can build savings account and related services before Bank of America can build a social or messaging app,” Thomas said. “Whether that’s what the market wants, time will tell.”

Musk has also a more loyal following than most football teams. One could see a path forward in which X leverages that popularity and X’s interest in cryptocurrency to make a play in the digital asset space.

“I think X could have a future in fintech if it enables users to send peer-to-peer cryptocurrency payments,” Ford said. “Beyond focusing on that niche, I’m skeptical to say the least on X entering the financial service space.”

However, it’s worth nothing that even PayPal has had to scale back ambitions to expand into stock trading and high-yield savings. And given the amount of high-cost debt Musk has saddled X with, it’s difficult to be anything other than skeptical.

Perhaps it will all work out and this column will look foolish in a few years, but, with apologies to Musk’s legions of fans, who remain convinced the billionaire can do no wrong, there is little to suggest this is anything more than bluster to revive investor interest in a struggling social media company.

[More: Schwab account migration reminds us why Twitter whining should be taken lightly]