The latest move from X to make headlines comes as CEO Linda Yaccarino announced it’s on the verge of integrating a payment functionality into the platform for users as it continues to pursue its mission to become the “everything app”.

While this is attracting plenty of media attention, the idea is not a new phenomenon. The concept emerged at the start of the 2010s with China’s WeChat and Alipay, which bundled up products and services into one platform encompassing messaging capabilities, social media, ride hailing, food deliveries and financial services.

The aim was to create a one-stop-shop for users providing a seamless, simple, and frictionless experience and ultimately, giving them no reason to leave the platform. This could very well be the blueprint for Musk’s and Yaccarino’s vision for X as they look to diversify revenue beyond advertising by asking its users to embrace the “idea of sending money as easily as sending a message”.

In fact, payments and messages are not dissimilar – if you look at how payments are processed around the world, these are essentially messages being sent through tools such as Swift. So, in spite of being positioned as a novel idea, X already looks like a payments network.

However simple Musk makes it sound, the road ahead doesn’t come without its obstacles. Despite many social media companies attempting to create a “super-app”, not many have proved successful outside of China. In 2017, Facebook tried to combine its messenger service with a peer-to-peer payment (P2P) tool but failed to gain traction with consumers while Snapchat ended its short-lived experiment with a similar offering in 2018.

One of the main challenges these businesses faced, and one Musk might fall prey to, is forcing a behaviour change amongst users - particularly considering the range of financial services available to consumers already. In the past, social media users haven’t found the switch as seamless as these companies hoped and instead defaulted to trusted, familiar payment methods like Venmo.

Industry commentators are already voicing their reservations about whether X will be able to change its user habits in the long term and have shared general scepticism about “bolting on financial tools” to social media apps. It’s been suggested that it'll be “difficult for consumers to change their payments habits” without “serious incentives” to lure them away from trusted market players. Companies that have tried before, have also learnt that only enabling P2P payments is not necessarily a lucrative business decision.

Looking at the evolution of payments more broadly - embedding financial services into digital ecosystems like Musk is dreaming up is not a radical idea. It’s been thirty years since Bill Gates declared that “banking is necessary, banks are not”. There was some truth in what he said.

Banks are still around but have changed in radical ways over the last two decades, responding to technological change and shifting consumer needs. Banking has always existed, because there’s a need. Take the Medici family in the 1400s: they put a bank in middle of the marketplace, embedding the principle of banking, where traders and merchants needed access to money.

While it wasn’t called embedded banking then, that’s exactly what it was. Fast forward to more recently – the ATM in the supermarket where you need cash to pay, setting up internet payments or right up to now where the focus has shifted to embedding financial services into digital ecosystems.

These are all examples of putting financial services at the point of need, whether we’re talking about the Medicis, the high streets, or Musk. They all had one thing in common – creating a central place of transaction.

Embedding payments on X will provide a critical source of income for Musk as traditional banking services continue to subside. According to Worldpay’s Global Payments 2024 report, digital wallets accounted for half of all eCommerce transaction value last year, presenting a huge opportunity for new market entrants.

For Musk, the most important consideration will be not going too big too soon. Building up the payment functionality sustainably to make sure it’s as responsive as possible to customers’ evolving needs will be critical. And while his immediate focus will be on getting the proposition running for external customers, there’s an argument to take this further.

Embedding banking infrastructure in X’s internal business also presents a huge opportunity – from driving efficiency and greater simplicity in its operations, helping to de-risk cashflow, and orchestrate complex payment flows. This is particularly relevant for businesses that operate across borders, like X, and should be the logical next step for the firm.

It’s inevitable Musk will face a whole host of hurdles in its implementation. Scrutiny regarding regulatory compliance and ensuring the safety of users’ financial information will be critical in driving consumer uptake.

However, if Musk can unearth the need, internally and externally, to embed banking infrastructure – and not simply just selling the ideas that it is just cheaper, faster and cleaner than existing banking options – he could well be onto something.

Paul Staples is the Head of Embedded Banking at ClearBank and has had a 20-year career founding, building and scaling tech and business platforms across multiple industries including Banks. Paul has been involved in Banking as a Service and Embedded Banking for many years and is an active commentator and advocate for safe and well-regulated Embedded Finance.

Prior to joining ClearBank in 2023, he was an advisor to several PE and VC firms and was formerly one of the founders of HSBC’s Global Embedded Banking business. At HSBC, he was charged with building and scaling the business by solving complex banking needs for customers and in doing so, unlocked value for all parties involved.