Despite Musk’s Bravado, X Faces an Uphill Battle in Launching Its P2P Network

Despite its formidable reach, the social-media platform X faces a steep climb to achieve its goal of launching a peer-to-peer payments service, according to payments experts.

X, formerly known as Twitter, announced in a blog post earlier this week its plans to add P2P payments to its platform this year as part of the company’s ambition to turn its platform into the next super app.

Obstacles facing X in this venture include building scale and achieving a solid user base, along with challenges concerning brand recognition, trust, and interoperability issues, Ariana-Michele Moore, an advisor in retail banking and payments for Datos Insights, says by email. “And of course, you must overcome the classic payment conundrum: which comes first, the payer or the acceptor. Zelle, despite its link to the largest U.S. banks, is still struggling to get consumer wallet share,” Moore adds.

Other challenges facing X include protecting against fraud and attracting users in the face of competition from other P2P services such as Zelle, Venmo, PayPal, and Cash App. Add to this user errors and interoperability issues, according to Moore. “It’s simply not easy,” she says.

X Corp. announced its intention to become a player in payments in January last year when chief executive Elon Musk broached the topic publicly. At the time, the company announced it had begun working on a payments app and applying for licenses across the United States to support the service. X Payments LLC, the payments subsidiary of X Corp., has reportedly obtained money-transmission licenses in just 14 states.

Moore points to research from Datos indicating that PayPal, which has a well-established brand name, still accounts for only about 10% of P2P transactions. Zelle, which is owned and operated by Early Warning Services LLC, a subsidiary of some of the country’s largest banks, also struggles with adoption, Moore says. She attributes this to the fact that the service is typically buried within a bank’s online services or mobile-banking app, which in turn buries the brand behind the bank’s brand and requires several steps to initiate payment.

The bottom line for X is that brand recognition is not a guarantee it will succeed in P2P payments, Moore says. “Facebook tried to launch a P2P network via MetaPay that didn’t really go anywhere despite Facebook’s huge user base and brand,” she says.

In spite of the obstacles X faces, it boasts one major advantage: its reach. X reportedly has more than 500 million active users, which means it is more likely a consumer will have an X account than a Venmo account, Kate Hampton, chief strategy officer at NMI, tells Digital Transactions News by email. NMI is a Schaumburg, Ill.-based payments provider.

“X is a mature, scaled network,” says Hampton. “It also has a product customers interact with several times a day, unlike a banking app that Zelle uses for an interface. Additionally, the growth of embedded payments suggests consumers are increasingly placing [a] higher value on simplicity of experience in their interaction with payments.”

P2P payments are not necessarily new to X. More than a decade ago, a company called Twitpay Inc. began providing social-media payments services, primarily over Twitter. Twitpay, however, was not owned by, or affiliated with, Twitter.

While Musk has a history of turning grandiose ideas into reality, there is no guarantee X’s P2P gambit will come to fruition this year. Building a P2P network requires investment and a broad range of competencies, according to NMI’s Hampton.

“This can mean things like deploying new technology, growing existing teams from engineering and product to sales and support, building new muscles to satisfy new regulatory requirements, or thinking through brand positioning and identity to become a company that users can trust with their money,” she says.

Nevertheless, Datos Insights’ Moore is bullish X will eventually deliver the goods. “Given his background, Elon Musk gets my attention when he says he’s interested in creating a P2P payments network,” she says.