Would You Entrust Your Savings to Elon Musk?

Would you entrust your savings to Elon Musk?

The query could appear hyperbolic, but essentially, that’s the multi-billion dollar query at the center of Musk’s “all the pieces app” vision, that he’ll have the option to persuade hundreds of thousands, even billions of individuals to entrust his X platform with all of their money, with the intention to conduct various financial transactions, all in-stream.

Musk’s view, based on his history in developing the primary iteration of PayPal, is that facilitating payments will not be enough, and that apps like PayPal could accomplish that way more, by way of providing banking services, loans, credit options. Essentially, Elon’s view is that if online apps can cater for payments, then why can’t they replace banks wholesale, and enable easy, fee-free funds transfer, in various forms, to streamline and improve the banking system?

In theory, this is smart. In response to McKinsey, the common US household generates around $2,700 in banking revenues annually, based on fees and charges attached to their various accounts and loans, and that quantity rises significantly for those earning over $100k. Imagine, then, when you didn’t have those extra costs, or you might limit them through alternative means.

Remittance is one other key use case. Yearly, over $100 billion in remittance is distributed back to families in India alone, and all of that’s subject to transfer fees and costs, much of it costing families that need money essentially the most.

The case for cheaper, faster transfers is obvious. But actually making it occur isn’t any sure bet.

Meta found this out the hard way. During the last decade, Meta has attempted various types of in-stream payments, all of which have been opposed by various governments and regulators in several regions.

Meta’s big payments push was Diem, its in-stream currency, which it hoped would enable it to side-step existing financial frameworks, and produce extra money into its ecosystem.

Back in 2019, Meta announced the primary stage of what was originally titled its “Libra” cryptocurrency project, which might offer fee-free transfers and payments within the app.

Meta leaned on one other former PayPal executive to guide the project, in David Marcus, but after three years of being put through the regulatory ringer, Meta eventually gave up on the project entirely last 12 months.

Why?

Because those making the choices on such projects didn’t trust that Meta needs to be handed the responsibility of coping with payments, which could potentially put more people at higher risk.

The project was seemingly doomed from the beginning, with big-name launch partners quickly rescinding their support as a result of scrutiny from US regulators, who questioned Meta’s push to get into payments. That scrutiny eventually led to Meta CEO Mark Zuckerberg appearing before the House Financial Services Committee to justify the initiative, but eventually, after trying various angles and avenues, the project was shuttered, and Meta moved on to facilitating payments via Meta Pay, which can be still facing significant pushback from many regulators.

The issue is, those making such decisions don’t feel comfortable allowing social media networks to turn out to be payments providers as well, given their collective track record on data security, privacy, etc. Add to this the indisputable fact that the powerful banking lobby is urging politicians to oppose any such move, and the wall confronting social apps trying to move into payments becomes very significant. As such, it’s going to be increasingly difficult for any individual platform to facilitate full payments in-stream, let alone banking, loans, and whatever else may come of such.

It’s hard to see Elon Musk, who’s made his dislike of the SEC and FTC very public, gaining the required nods and ticks to go ahead on his own all-encompassing payments app vision.

Perhaps, there’s another leverage that the world’s richest man can lean on to force his will, and make this occur, and possibly there may be one other avenue that Meta couldn’t find in its development process.

But straight away, it’s hard to see how X becomes that next-stage app, much like Chinese messaging platforms like WeChat which have turn out to be ingrained in on a regular basis life. Your WeChat barcode is your digital identity in lots of respects on the Chinese mainland, but can X do the identical, and turn out to be the critical connector, for all the pieces, as Musk envisions?

He’s definitely going to try. X has already gained initial payment licensing agreements in various US states, which is a critical precursor to enacting this push.

And Elon has a history of working in difficult niches.

If it were anybody else, I believe the payments proposal can be dismissed already, but few are daring enough to bet against Musk, and what he may have the option to do, based on past history.  

But even when he can get all of the approvals, the query stays. Would you entrust your life savings to a platform run by Elon Musk?