X.com and banking: Third time's a charm? Or three strikes and Elon's out?

Gabby Jones/Bloomberg

The rise of the original X.com came at a time when there was a void to be filled on the internet. 

Credit cards were considered too clunky to be used for all online payments, and there was no such thing as a digital wallet. X.com, Elon Musk's former online bank, stems from that era. In 2000, it combined with a company called Confinity to form PayPal, and Musk himself joined a group of like-minded entrepreneurs called the PayPal Mafia. 

At the time, X.com and PayPal did something no bank could match — and many tried. Before eBay bought PayPal in 2002, the online marketplace partnered with Wells Fargo on a payment system called Billpoint. The idea was to undercut PayPal's fees and keep payments flowing through a major bank. Despite eBay owning 65% of Billpoint, just 15% of eBay sellers were using it by 2001, compared with PayPal's 60% — and unlike Billpoint, PayPal could be used on any website. 

PayPal kept ownership of the X.com brand name and tried to revive it in 2009 by using the X.com domain as a hub for developers. In 2011, it relaunched as X.commerce. PayPal split from eBay in 2015, and Elon Musk purchased the X.com domain in 2017.  

Tony Avelar/Bloomberg

Today, the dynamics have flipped from where they were in 1998. The internet is overrun with payment options including credit cards, mobile wallets, P2P apps, cryptocurrencies and more. It's so easy to conduct transactions online that my 16-year-old niece refuses to put her savings in a bank account; she converts her earnings to cash because that makes it harder to spend, she says. 

More broadly, her generation seems to be the most skeptical of keeping money in a bank. A survey published this month by The New Consumer found that 30% of Gen Z respondents do not believe their money is safe in a bank account, compared to 23% of millennials, 18% of Gen Xers and 8% of baby boomers. 

So where does the new X.com, with its aspirations of banking and payments, fit in with a generation that is increasingly wary of the banking system?

In its third lease on life, many have compared X.com to Meta's failed bid to create a cryptocurrency, Libra. But Twitter itself has been down this road before.

Many companies rely on Twitter and other social media platforms to promote their own products, and those platforms have tried repeatedly to enable users to do business without having to click away to another e-commerce site.

In 2014, Twitter began testing a "Buy Now" button; the same year, Twitter bought CardSpring, a payments infrastructure company that allows merchants to track promotions across channels. Twitter later partnered with BigCommerce, Shopify and Demandware to boost its reach among the clients of those e-commerce platforms. 

In 2021, Twitter debuted a Tip Jar feature, allowing creators to collect donations from their followers. But this received some backlash for the amount of personal information it shared with the payee (such as the shipping address tied to the user's PayPal account).

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Elon Musk's new X is very different from the Twitter he bought last October. Its ad revenue for the five-week period starting April 1 was down 59% from a year earlier, according to The New York Times, which attributed the decline to the platform's inability to moderate hate speech and pornography, among other concerns. 

Additionally, 60% of Twitter users had "taken a break" of several weeks or more in the past 12 months, according to a survey published in May by the Pew Research Center. Meanwhile, Meta's new social network, Threads, attracted a surge of sign-ups when it launched this month, though most did not become active users. 

Even if Musk's X were not losing advertisers and alienating consumers, Musk's greatest challenge may be the current incarnation of his past success — PayPal itself. The digital payment brand has launched its own "super app," designed to offer an assortment of financial services through a single interface. It sounds a lot like Musk's own plan to turn X into an "everything app."

Musk may indeed strike gold again with X.com if he can stem the bleeding of the platform's users and advertisers. But if its audience doesn't want to keep money in a social network — or even in a traditional bank — then this version of X may be the third strike for the brand.