Trust to dust

Trust, not tech, remains the lynchpin of financial services.

Andrew Carrier

Feb 02, 2025

Read on to learn why:

① No one legitimate wants payments on X.

② Marketing is about earning and retaining your customers’ trust.

③ Investment banking requires absolute, long-term commitment.

④ The AI race has barely even begun. And efficiency will always rule the day.

⑤ Brand supports demand.

⑥ Investors are chasing after ever more esoteric products.

⑦ Crypto currency is useless.

What's new

X has announced the launch of a digital wallet and peer-to-peer payment service in partnership with Visa, The Paypers reports.

Elon Musk. Source: The New York Times, 28 January 2025

In short:

“The collaboration makes Visa the first financial partner for the new offering, known as the X Money Account. The service will allow X users to transfer funds between traditional bank accounts and their digital wallet, as well as conduct real-time peer-to-peer transactions, similar to existing platforms such as Zelle and Venmo.”
“The initiative marks the first major step by X toward integrating financial services into its social media ecosystem. When Elon Musk acquired the platform, then known as Twitter, for USD 44 billion in 2022, he described his vision of transforming it into a multifunctional application. He later suggested that the platform could evolve to handle a wide range of financial transactions.”
“Over the past year, the company has been securing the necessary state licences. X Payments LLC is currently licenced in 41 states and is registered with the Financial Crimes Enforcement Network. The X Money service is scheduled to launch in the first quarter of 2025, with additional financial partnerships anticipated. A source familiar with the matter cited by CNBC indicated that one of the initial applications will enable content creators on X to receive payments and manage funds directly within the platform, reducing reliance on external financial institutions.”

Why it matters

Long-time IMTW readers will know what a huge Twitter fan I used to be. Before Musk bought it, I was an advocate of its existing value and a vocal proponent of all the exciting ways the app could be extended, including - of course - into financial services. But then Musk did buy it, turned it into X, and told its advertisers to go “fuck themselves”. All the trust and goodwill serious people had built-up in the platform dissipated in a matter of months. One in five users soon left and the rest have been dwindling ever since. Hell, even the banks who financed the acquisition are now giving up. The Wall Street Journal reported this week that the likes of Bank of America, Barclays, and Morgan Stanley - who had been holding onto the debt, hoping for more favourable economic headwinds - are preparing to sell “senior debt at 90-95 cents on the dollar, while retaining more-junior holdings.”

I don’t doubt Musk’s aspiration of turning X into an ‘everything app’. That vision has been with him for a long time (his x.com merged with Confinity in 2000 to form PayPal after all.) No doubt, X is talking to Amex, Mastercard and more potential partners. I’d be surprised if crypto payments weren’t also part of the plan. Longer term, I’m sure he’s got online brokers and wealth managers in his sights too. But, make no mistake, Musk is an extremist. And, as the Guardian has commented, that’s where the real value of X lies to him:

“As a political proposition, Musk’s purchase may turn out to be one of the shrewdest investments of all time. Every week, the platform seems to supercharge a news issue that comes to dominate conservative discourse – and often mainstream discourse, as well – with real political repercussions.”

① Those who enjoy fanaticism, lies, misogyny, frat boy humour, crypto scams or Nazi salutes, might well be comfortable trusting X not just with their micro-blog posts but their financial services too. But the rest of us? Well, there’s already a huge ecosystem of healthy alternatives. My point, the reason this story matters, is that - despite all the news coverage and hype Musk is able to generate with the flimsiest of utterances - I’m not convinced anyone legitimate wants payments on X. The trust is long gone.

What to do about it

Take action

② No action to take this week, dear reader. Just a reminder that all marketing - but particularly in financial services - is first and foremost about earning and retaining your customers’ trust.

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Top stories

The other articles that are worthy of your time.

FINANCE

HSBC to exit parts of investment banking business in UK, US and Europe

③ Investment banking requires absolute, long-term commitment.

Source: The Financial Times, 28 January 2025

“HSBC will shut key parts of its investment banking business in the UK, Europe and the Americas as part of chief executive Georges Elhedery’s plan to overhaul its operations. Europe’s biggest lender will close its mergers and acquisitions advisory and its equity capital markets businesses outside Asia and the Middle East.”
“The units ‘really don’t have scale’, said a person with knowledge of the decision. ‘It was just a very tough job to build up to a level where [HSBC] has a competitive edge.’ Continuing to try to ‘break in’ to those markets would not be the best use of the bank’s resources, they said. HSBC will keep its debt capital markets, leveraged finance, real asset finance and infrastructure finance businesses in those markets, the person said, as those units have greater scale.”
“The decision underscores how small investment banking is as a portion of HSBC’s business. Globally, investment banking accounted for just 6 per cent of HSBC’s total revenues in the first half of last year, according to the bank’s interim report. Investment banking revenues for the period were down 3 per cent from a year earlier.”

TECHNOLOGY

What is DeepSeek? And how is it upending AI?

④ The AI race has barely even begun. And efficiency will always rule the day.

Source: The New York Times, 27 January 2025

“DeepSeek caused waves all over the world on Monday as one of its accomplishments — that it had created a very powerful A.I. model with far less money than many A.I. experts thought possible — raised a host of questions, including whether U.S. companies were even competitive in A.I. anymore. DeepSeek is a start-up founded and owned by the Chinese stock trading firm High-Flyer. Its goal is to build A.I. technologies along the lines of OpenAI’s ChatGPT chatbot or Google’s Gemini.”
“Since late 2022, when OpenAI set off the A.I. boom, the prevailing notion had been that the most powerful A.I. systems could not be built without investing billions of dollars in specialized A.I. chips. That would mean that only the biggest tech companies — such as Microsoft, Google and Meta, all of which are based in the United States — could afford to build the leading technologies. But DeepSeek’s engineers said they needed only about $6 million in raw computing power to train their new system. That was roughly 10 times less than what Meta spent building its latest A.I. technology.”
“The startup’s engineers demonstrated a more efficient way of analysing data using the chips. Leading A.I. systems learn their skills by pinpointing patterns in huge amounts of data, including text, images and sounds. DeepSeek described a way of spreading this data analysis across several specialised A.I. models — what researchers call a ‘mixture of experts’ method — while minimising the time lost by moving data from place to place.”

MEDIA & MARKETING

How to calculate the return on investment for brand strategy

⑤ Brand supports demand.

“According to the Gartner CMO Spend Survey, marketing budgets are down to 7 per cent of company revenue in 2024 from 9.1 per cent in 2023. They’re also yet to recover to pre-pandemic levels. But that’s why brand strategy is more important than ever.”
“If you want your marketing to be more efficient at reaching and converting your target personas, it can’t be random. ‘Random acts of marketing’ are where you waste your budget. In fact, Boston Consulting Group (BCG) research found that strong B2B brands see a 74 percent higher brand marketing ROI and 46 percent higher market share than weaker B2B brands.”
“There are multiple areas that any business can use to calculate the ROI of brand strategy. These include:
- Brand awareness
- Customer satisfaction and loyalty
- Brand equity
- Employee engagement
- Investor relations
- Market share”

WILDCARD

Why your portfolio is less diversified than you might think

⑥ Investors are chasing after ever more esoteric products.

“Holding a varied portfolio is easier than ever. Foreign assets can be bought at the tap of a trading app, while cheap index funds give investors instant exposure to thousands of stocks in dozens of countries. The idea of diversifying across asset classes as well as geographies—via the classic 60/40 portfolio of stocks and bonds, for instance—is firmly in the mainstream. More exotic choices such as commodities and cryptocurrencies have become more accessible to retail investors, too, and private assets may eventually follow suit.”
“Unfortunately there is a catch, and it is a big one. Building a portfolio that looks diversified has become a cinch. Building one that is actually diversified, in the sense that its components offset each other’s risk, has become much harder. Diversification gets its magic from the fact that the prices of different assets do not all move together.”
“Yet just as it has become easier to invest in a wide array of assets, the correlations between them have shot up. Geographical diversification has followed a trajectory which is wearily familiar to financial historians. When few investors could manage the trick, it was a stellar idea. Once it was popular and available to the mass market, its dynamics were distorted and the benefits started to fade. […] In the case of diversification, once investors started spreading their capital across stockmarkets, they all began to resemble each other.”