X began rolling out its X Money payments service to select Premium+ subscribers, kicking off the long-anticipated service by a user sending Elon Musk $25 to test its peer-to-peer money transfer feature. (Why didn't Musk send him the $25?)
In addition to P2P transfers, X Money offers up to $10M FDIC insurance on deposits (spread across multiple partner banks), a metal Visa debit card with free ATM withdrawals and no foreign transaction fees, as well as the ability to pay by wire transfer or check, similar to how Bill Pay works at banks.
Even more notable, the account advertises a 6% APY on deposits and a 3% cashback on debit card transactions, which is around twice what other leading banks and fintechs are currently offering. The service is licensed in 41 states plus DC, but not yet New York or Massachusetts, among others.
Earlier this year, I reported that Senator Elizabeth Warren sent a letter to Elon Musk, raising concerns about the upcoming launch of X Money. Her letter touches on how the launch comes one year after Musk pushed to dismantle the CFPB and how X Money partners with Cross River Bank, which Warren labeled as a “repeat offender” of “unsafe and unsound practices related to fair lending.”
I recognized some of her concerns, but pushed back on her claims that the 6% APY is built on “risky investments” and “intrusive data monetization activities.” There are plenty of legitimate investments that could earn that yield. Just because other banks keep the spread for themselves doesn't mean the vehicles don't exist. Earlier this month, I wrote about how U.S. banks captured roughly $485B a year by paying customers with savings accounts far less than the Federal Reserve paid them, according to a 17-year analysis of Federal Reserve and FDIC data.
There's a huge spread between what banks take in and what they dish out, and the industry is ripe for disruption. X Money could put some much-needed pressure on legacy banks to make their financial products more attractive for your average customer. I hope it does.
As many of you know, Elon Musk was the founder of X.com, one of the Internet's original payment systems, which later merged with Confinity's PayPal product and eventually took on the PayPal name. Decades ago, Musk was very much at odds with his partners at PayPal, almost ousted as CEO at one point, and it's been very well documented since then that he always planned to one day build his original vision of a financial platform. He took a few side quests along the way, building electric vehicles, rocket ships, underground tunnels, chips that connect to your brain, and of course buying a social network, but it's interesting to see him follow through on his original X Money vision years later.
