Will Visa Deal Give X Money Momentum vs Neobanks?

Elon Musk’s bid to make X into the “everything app” may have gotten a bit of a boost — where the newly-announced pact with Visa is a significant “something” on the way to “everything.”

And in doing so, the person-to-person (P2P) payments functionality for X Money represents a shot across the bow for Venmo, and also for neobanks that, as Musk has set out to do, want to provide a broad range of financial services for consumers through their own apps.

As PYMNTS reported Tuesday (Jan. 28), the social network is partnering with Visa, wherein X will use Visa Direct to move funds into X Money wallets. The wallets, in turn, will be connected to debit cards and bank accounts.

Per an announcement by X CEO Linda Yaccarino, the joint efforts will allow “secure + instant funding” to an X Wallet. And it is the wallet, we note, that would be a linchpin for a variety of financial activities.

PYMNT Intelligence’s own research has noted that digital wallets are finding wide embrace across the globe as a primary vehicle for payments, and depending on where you look, as a central point of access for a range of non-payment activities, including storing credentials. In reference to the United States, as detailed here, 48% of consumers use their digital wallets for online shopping, while 39% use them in-store. In other research, we’ve found that consumers were voicing that they’d trust a number of Big Tech names to store their payments credentials, which would pit those firms against traditional banks.

The Regulatory Factor

There’s a (large) unknown here, chiefly in the form of how, and even when, the regulatory landscape might be clearer for Big Tech’s ambitions — a roster of firms here includes Apple, Meta and others, and of course, X. At the end of last year, the Consumer Financial Protection Bureau (CFPB) finalized rules on digital wallets, and for providers that process more than 50 million transactions annually. Those rules touch on everything from customer experience to compliance, and would effectively treat the large nonbanks like banks. Legal challenges have arisen, and the fate of the CFPB is not at all transparent under the new Congress and presidential administration.

X, for its part, has been securing money transmitter licenses, and as can be viewed in this posting, has licenses in 40 states and the District of Columbia. The regulatory groundwork is being laid for funds to flow through broad swaths of the U.S., at least, if not country wide.

Visa’s own momentum with Visa Direct has been significant, as well. We’ll know more when the payment network giant reports earnings this week. But last month, the company said Visa Direct would make funds delivered to U.S. bank accounts available within one minute. This capability will begin in April 2025, allowing consumers, businesses and governments to use Visa Direct to deposit money to bank accounts linked to eligible debit cards in real time — which, as noted above, is the model described in the Tuesday announcement. Visa reported in October that Visa Direct transactions grew by 38% in its fiscal fourth quarter to 2.8 billion and that the year’s total number of Visa Direct transactions reached almost 10 billion.

PYMNTS had reached out to Visa for comments about the announcement, but had not heard back as of this writing. A post on Visa’s X account stated that the firm is “excited to partner with Xmoney on the launch of the X Money account.”

As for the competitive shift: X has more than 200 million global daily active users, as of mid-year 2024 (the firm is of course now private so exact figures are harder to come by on a quarter-by-quarter basis). That’s a large installed base to which X can market the digital wallet, and of course, the payments tool itself. Visa’s own financials reveal mid-single digit percentage point growth in debit card payment volumes in the U.S. alone. The total number of debit cards grew by 8% year on year worldwide. So: There’s significant cross-pollination in the making here.

Many neobanks have been striving mightily to find firmer footing as players that are more than just debit cards to be used in an online setting (though, as in the case of SoFi and others, there’s been strength as consumers set up direct deposit accounts). Venmo’s stats will become clearer with the likes of the PayPal announcement of its latest earnings, also on tap within the next several days. Venmo’s growth in the most recently reported quarter was 8%, as measured by TPV .

The P2P arena’s gotten a bit more crowded as of Tuesday — and X’s push into finance has moved a bit closer to becoming fully realized.