How Affirm, PayPal and Now Musk’s X Money Will Jockey for Gen Z’s Money in 2025
As consumer payments options multiply, keep your eye on Elon Musk's X Money, Affirm and PayPal as they challenge traditional players — and each other.
By Steve Cocheo, Senior Executive Editor at The Financial Brand
It’s not exactly sibling rivalry, but the competition for Gen Z and other digital money enthusiasts among Affirm, PayPal and now X Corp. has hints of it.
The three companies share common roots, detailed below, that will make their evolving financial services rivalry especially interesting to watch. Just what X will be doing in payments is wrapped up in bigger plans for the platform and there’s more guesswork than facts right now. PayPal has been playing big and broad in payments for some time and has aggressively ramped up plans to carry its brand into physical point of sale. Affirm is moving beyond its original roots into a bigger role via debit while growing its role in interest-bearing credit products.
At stake: The spending of Generation Z and beyond.
As recounted by Walter Issacson in his eponymous biography of X’s Elon Musk, when he parted ways from Peter Thiel, then a founder of PayPal, and Max Levchin, of PayPal and of Affirm, it was noted that he closed out the relationship with uncharacteristic calm and class. (And in time a very large check.)
Competition to come, played out in the market and likely also in a new Washington, likely won’t be so friendly.
1. ‘X Money’: Not Yet ‘Bank of Musk’ but Moving Toward Reality
People have been talking since at least 2022 about Elon Musk getting into banking and payments via X, formerly known as Twitter. Musk isn’t new to financial services, having been a co-founder of a predecessor company of what became today’s PayPal. In fact, his original X.com was intended to roll up banking, checking, digital payments, credit cards, investments and lending.
Musk, President-Elect Donald Trump’s "First Friend" and co-head of the Department of Government Efficiency, among many other things, now appears poised to get back into financial services.
On the last day of 2024, Linda Yaccarino, CEO at X Corp., posted on her platform (can’t say "tweeted" anymore):
"In 2024, X changed the world. Now, YOU are the media! 2025 X will connect you in ways never thought possible. X TV, X Money, Grok and more. Buckle up. Happy New Year!"
During a fireside chat at CES (formerly the Consumer Electronics Show) in early January, Yaccarino spoke of X Money as something that "is going to change both payments and the opportunities creators have on the platform forever."
That was actually the extent of what Yaccarino said specifically about financial services, in spite of multiple publications’ writeups referring to her remark as "an announcement."
But the context was critical. Yaccarino made multiple comments about Generation Z’s high attraction to X, especially in regard to "community noting," a collaborative feature meant to provide community-driven fact checking and commentary on X posts. "Authenticity matters to Gen Z," she said. She added that a recent Advertising Age/Harris Poll found that the top brand getting Gen Z attention is X.
"Why is that?" she said. "It’s culture. It’s sports. It’s music. It’s gaming in real time when they want to see it." She made multiple references to X as "the global town square" — on some level, Musk wants to be the bank on the square.
Yaccarino spoke of an evolving X news portal to be run by a former Wall Street Journal bureau chief and of how X provides generous revenue sharing to independent journalists who publish through X. This toe-dip into payments is through X’s Creator Revenue Sharing program, which is processed by Stripe. (Stripe offers programs for compensating creator contributors to other platforms as well.)
In this context, X Money doesn’t sound like your father or mother’s bank. In fact, if you are over 28, X Money may not be designed for you, either. Sorry Millennials.
According to a special page listing money transmitter licenses for X on the site, X Payments LLC currently holds 39 licenses. In April 2024, it withdrew its application for a license in New York, considered a key state, after a major law firm objected to the application.
Apparently, the X Money effort is moving ahead in some fashion, given Yaccarino’s brief but very enthusiastic comment. This comes in the wake of an X poster’s publication of a snippet of what is said to be X code that suggests that language would pop up if someone was in a state where X Money services couldn’t be used yet. The implication is that others will be able to use it.
Speculation is rife about what X Money payments would look like, including whether cryptocurrency will play a part, and the competitive mix could grow wider. Commenting on the developments in a post, eMarketer said: "For X Money to take off, it will have to differentiate itself from the major P2P players," like Zelle, Venmo and Cash App.
Read more: Why Elon Musk Wants to Disrupt Banking Next
2. Affirm Card is an Expansion Bankers Must Watch
Speaking of PayPal alumni, another key player is Max Levchin, who went on to found Affirm. Initially one of the pioneers in nonbank buy now, pay later services, Affirm has been broadening beyond this specialty. While BNPL arrived on the scene with "no interest charges" as its differentiator, Affirm has many variations on the theme now.
In fact, in a mid-December fireside chat sponsored by Deutsche Bank, Robert O’Hare, CFO, said that in the quarter ending in September 75% of Affirm’s loans were interest-bearing.
During the chat, O’Hare was asked about competition in the BNPL sphere. Specifically, the questioner wanted to know how much pressure Affirm was feeling from credit and debit card issuers who have been offering post-purchase BNPL — that is, the ability to split purchases initially put onto a card into installment payments.
O’Hare noted that one of Affirm’s strengths is that merchants often feature its availability right on a given product’s page.
"Most of the credit card [issuers’] models that I’m familiar with are where they’re taking a purchase that’s already happened and then offering differentiated financing terms for that purchase," said O’Hare. "It misses out on partnering with the consumer early in their shopping. And we think that’s a real advantage for us."
Affirm also underwrites every extension of new credit, which it maintains separates it from bank credit cards that are underwritten to a pre-approved, open-ended credit line.
Affirm has been moving beyond BNPL deals with specific merchants to making its services available to merchants in various ways through platforms such as Shopify, Stripe and Amazon.
But a major effort outside of ecommerce — into what its people call "off-line commerce" — is the Affirm Card.
The card is a Visa debit card that is accepted anywhere the payment brand is. Part of its purpose is to help Affirm continue its transition from BNPL-only to becoming a full-fledged payment company. The card, first announced in early 2021, has over 1.4 million card holders and the company target is 20 million active card holders. Part of the idea behind the Affirm card is that it can capture everyday spending as well as be an entrée for larger purposes that can be served with payment plans.
"Affirm Card is a really elegant way to get all of the functionality and all the access to credit that Affirm offers, and to get that in a brick-and-mortar setting," said O’Hare. "That’s a big untapped area for Affirm, and also for the buy now, pay later industry at large." Part of the beauty of the card vehicle, from the company’s perspective, he explained, is utilizing the traditional industry’s payment rails.
Elaborating, O’Hare said: "No one has really cracked the code on off-line spend, and we’re seeing a really nice uptick of Affirm Card in the off-line world. In our last quarter, we were north of 40% in terms of the mix of GMV that was coming from off-line spend." (GMV stands for gross merchandise value, the volume of sales paid with Affirm services.)
Affirm has not only been building the card, but using it as a "test-bed" for experimentation and expansion. The Affirm Card is the first U.S. card product to use Visa’s Flexible Credential program, beginning last November. Visa indicates that over 100 issuers are in the wings — but in the U.S., payments newcomer Affirm was first.
One other differentiation about the Affirm Card: The company sees pricing as an incentive for increased consumer use — reducing interest charges, or granting a 0% offering, based on usage.
O’Hare said that such efforts should be experimented with, to drive more use, "more so than a cashback program or a traditional rewards program."
Read more: Where is Visa Headed with its ‘Flexible Credential’ Concept?
3. PayPal Pushes for More Usage Everywhere
In 2024, PayPal was revamping and restaffing in the midst of the pitched battle of payments, all while rethinking its perspectives.
"The last year has been focused on restructuring and reformulating back into investment and innovation," said Jamie Miller, CFO, at the UBS Global Technology and AI Conference in early December.
A key part of the public side of this has been updating the look and feel of PayPal’s "branded checkout" online and on mobile. "It’s a much faster, cleaner experience. It is visually better. The integration with the merchant happens in a much more seamless way," said Miller. "But more importantly, for the merchant, it provides conversion uplift of up to 400 basis points, in terms of what we’ve seen so far."
Of course, that uplift is to PayPal’s benefit as well, with gains in closed sales funneling through its system.
PayPal had about 30% of its merchant base converted at the time of the UBS conference, accounting for about 5% of transaction volume at that point. "That is our big project for 2025," said Miller.
While much of that is going on behind the scenes, something to watch on the public side is the continuing "PayPal Everywhere" effort to promote use of the PayPal debit card in the off-line world and all other channels. That marketing campaign debuted in September, with a high-profile TV effort featuring Well Ferrel. A key feature is a 5% cash back incentive, in the consumer’s category of choice, for up to $1,000 a month.
That’s a key differentiation between PayPal and Affirm on the debit card front, with the former leaning into rewards and the latter ditching them.
Miller said that the PayPal Everywhere campaign has seen over one million debit card users come into the program. That’s notable because PayPal’s recent gain is about the size of Affirm’s current total base. Usage is picking up and she says there’s been a "halo effect" through which consumers are either using their debit card balances for online shopping as well or using branded checkout for more purchases.