What do Elon Musk and Brian Armstrong have in common? Both want to become your primary financial institution.
The race for disruption is not solely in the realm of Web 3.0. In fact, a case could be made that it isn't even in the game yet.
That does not mean it is not heating up. The players are Web 2.0 entities which are looking to attack the incumbents with regards to payments, banking, and other financial services.
Heading up the list are X and Coinbase based upon recent comments by the CEOs.
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The Changing World of Finance
Elon Musk made no secret of his plans for X. It was far more than a social media network for him. This was affirmed by his CEO, Linda Yaccarino who stated the payment system was coming to X "soon".
It would appear this is going to take on PayPal, a company with a market capitalization of $61 billion. X has roughly 500 million users, making it the largest payment rail in the US.
Not to be outdone, Brian Armstrong of Coinbase wants that company to be people's primary financial account. The goal is to become something more than just a crypto exchange.
This will be done by adding financial features that will enable people to turn to it as compared to their bank accounts.
Here we see it entering the world of companies such as Bank of America, with a market cap of over $300 billion.
It is clear there are trillions on the table when it comes to the global financial system. Newer players are looking at staking their claim. FinTech seeks to get more powerful.
Massive Disruption
Cryptocurrency is going to cause massive disruptions.
We are at the early stages of a prolonged transformation. With Musk, rumors are incorporating DOGE coin as part of the payment system. Whether that happens or not is still unclear. What we can surmise is that, at some point, crypto will be used for payments.
Coinbase obviously is already in the game, having stablecoins available on its platform. There are tied to bank accounts, offering up another form of payments.
All of this is taking place right before our eyes.
The challenge is the swapping out for one centralized entity for another. We are aware of the drawbacks to the banks. They extract a great deal while reigning supreme over the financial system.
Will things be any different with the likes of X or Coinbase? Certainly PayPal mirrored what already was present, just in a digital form.
There could be a bit of a difference; an improvement if you will. However, this disruption is nothing more than switching deck chairs on the Titanic.
Going from one dictator to another is not a massive gain.
Nevertheless, the doors of disruption are opening, being pushed by those entities we commonly identify with as Web 2.0. Even Coinbase has become part of the establishment.
Web 3.0 Opportunity
Does any of this help Web 3.0?
Actually, it does.
When it comes to change, the most crucial factor is people. The appears to be a hesitancy for people to embrace new things. When it comes to the financial system, the status quo is the norm.
Banks depend upon long term customers. Consider this: how long have you had your bank account? It is not uncommon for people to have one for years, if not decades. Open up a retirement account, it is likely not changing for decades.
The same is true for a service like Visa. People get a Visa card from a bank and do not get rid of it.
Basically, people are hesitant to change.
The moves of an X or Coinbase could open people up to this. Here is Web 3.0 has an opportunity. Of course, like the other companies, a great deal of buildout is required.
One advantage that PayPal and Bank of America have is their services are in place. Visa has a network of millions of nodes throughout the world, all tying into their system.
Web 3.0 is nowhere near this point. It is still lacking even basic infrastructure for even the most rudimentary of payment systems.
Musk set his sights on making X the largest financial institutions in the world. He is onto something in the sense he has the users. When you look at the number of accounts of a bank versus X, there is no comparison.
For example, Bank of America has roughly 66 million individual and small business accounts. X has around 500 million users. How many of them can be converted to financial services is the question.
The key is to have full service financial offerings. This is what Web 3.0 has to focus upon. At the same time, a "hook" is needed. With X, there is the social media aspect. He can take those customers and add payments. On top of that, he could acquire a mortgage origination company to take on the likes of Quicken loans.
If this is the path for X, it is the model for Web 3.0. Naturally, Musk is doing it all in a centralized manner. Web 3.0 takes a different spin on things. Here is the divergence.
Ultimately, it comes down to actually offering financial services. Payments are just a beginning and a small one at that.
There is a reason why JPMorgan is worth more than half a trillion dollars. It is involved in areas of finance that most people do not realize even exist.
This is what Web 3.0 ultimately needs to tap into.