Twitter has reportedly begun the process of applying for regulatory permission across the U.S. and designing payment software to fit the entire Twitter platform, sources said. Elon Musk is currently exploring new revenue streams for Twitter to reverse an unfavorable trend in business development.
Esther Crawford, who is fast emerging as Elon Musk’s deputy within Twitter, has led a small team to plan the structure needed to offer the payments service, two people with knowledge of Twitter’s plans said.
The launch of the payments service is a key part of Elon Musk’s plan to expand new revenue streams for Twitter. Twitter’s $5 billion annual advertising business has struggled since he bought it for $44 billion last October. Advertisers and marketing industry players have expressed concern about the management and content review of the Twitter platform.
Elon Musk has said he wants Twitter to offer fintech services such as P2P transactions, savings accounts and debit cards, pushing it to become a “super app” that combines instant messaging, payments and e-commerce. which later became part of payments giant PayPal.
Crawford’s team is moving forward with that, including designing a secure database to store and protect user data collected by the system, two sources said.
Twitter is also moving forward with the regulatory review needed to offer payment services. Last November, Twitter registered with the U.S. Treasury Department as a payment processing service provider, according to a regulatory filing. Twitter is now starting to apply for related licenses in some U.S. states, the sources said.
The rest of the regulatory applications will be filed soon, and Twitter hopes to have the licenses it needs in the U.S. within a year, a person familiar with the matter said. The company will then continue to expand, seeking regulatory licenses internationally.
Prior to Elon Musk’s acquisition, Twitter had already established a subsidiary, Twitter Payments, in August last year, and Elon Musk recently appointed Crawford, who is head of product management for Twitter, as CEO of Twitter Payments.
However, if it wants to achieve Elon Musk’s goals, Twitter will need to meet new technical challenges, take on complex compliance work and earn the trust of individual users.
That work will likely be costly. Late last year, Elon Musk approached Twitter’s investors to try to raise more money, one investor said. He said at the time that some of the money would be used to push through a massive hiring drive to develop a “super app” that could handle payments.
Before its acquisition by Elon Musk, Twitter was also exploring offering payment capabilities around individual products such as rewards and platform commerce.
People familiar with the matter said that Elon Musk’s goals go much further than that, and involve letting users reward creators, helping users buy goods directly from the platform and enabling payments between users. In addition, ELon Musk has said that he wants to launch a fiat currency payment system first, followed by gradual support for cryptocurrencies, the sources showed.
In May of last year, Elon Musk provided investors with a document during his acquisition of Twitter that showed he was aiming for about $1.3 billion in revenue from Twitter’s payment services by 2028.
Hundreds of thousands of Twitter users share links to third-party payments on their tweets or accounts, according to FXC Intelligence, a payments market data group. Lucy Ingham, the company’s head of content, said, “Twitter is already a platform where there’s a lot of payment activity, so it’s not a surprise that this decision was made.”
Other payments experts, however, question whether Twitter’s payments services will reach sufficient scale to be competitive in the industry, especially in the United States. Similar services in the U.S. include Venmo, Cash App and Zelle, among others.
Twitter will also face strict regulatory scrutiny. Before entering the payments industry, Elon Musk had already laid off more than half of Twitter’s staff, raising concerns about its lack of compliance staff. Companies are required to report unusual activity to regulators if their services involve money transfers, foreign exchange and check withdrawals.
To monitor fraud and suspicious transactions, users’ accounts must complete real-name verification, said Lisa Ellis, a senior analyst and payments expert at market research firm MoffettNathanson. Such regulation means that “many tech companies will opt out after trying.” “They find it burdensome to take on long-term investments and risks: the potential for fines if things go wrong, and the necessity to build a compliance infrastructure that can sustain regulatory approval.”
