Twitter has begun applying for regulatory licences across the US and designing the software required to introduce payments across the social media platform, as Elon Musk searches for new revenues to turn round the business.
Esther Crawford, a fast-rising lieutenant to Musk inside Twitter, has started to map out the architecture needed to facilitate payments on the platform with a small team, said two people familiar with the company’s plans.
The nascent moves to allow payments through the site are a critical part of Musk’s plan to open up fresh revenue streams. Twitter’s $5bn-a-year advertising business has cratered since he bought the platform for $44bn in October, with marketers citing concerns over its management and content moderation.
Musk has said he wants Twitter to offer fintech services such as peer-to-peer transactions, savings accounts and debit cards, as part of a master plan to launch an “everything app” that incorporates messaging, payments and commerce. In 1999, Musk co-founded X.com, one of the first online banks, which later became part of payments giant PayPal.
Crawford’s team is forging ahead, including devising a vault for storing and protecting the user data that would be collected by the system, said two people with knowledge of the team’s efforts.
Twitter is also pushing forward with the regulatory checks needed before launching a payment service. In November, Twitter registered with the US Treasury as a payments processor, according to a regulatory filing. It had now also begun to apply for some of the state licences it would need in order to launch, these people said.
The remainder would be filed shortly, in the hope that US licensing was completed within a year, one of the people said. Then the company would seek to expand to gaining regulatory approvals internationally, they added.
While Twitter had set up a subsidiary, Twitter Payments LLC, in August last year before Musk took over the company, Musk recently appointed Crawford, Twitter’s director of product management, as the chief executive of Twitter Payments.
But delivering on Musk’s vision will require taking on new technological challenges, significant compliance burdens and winning consumer trust.
It is also likely to be costly: late last year, Musk approached Twitter’s equity investors in an attempt to raise more capital, indicating that some of the money would be used to fund a “hiring spree” of programmers to build a “super app” that could process payments, said one investor who received the offer.
Prior to Musk’s takeover, Twitter had been exploring some payments features around tipping creators and ecommerce.
Musk’s vision goes far beyond that, including exploring more ways for users to reward creators directly, for users to buy items directly through the platform and for users to pay one another, according to three people familiar with the plans.
Musk has said he wants the system to be fiat, first and foremost, but built so that crypto functionality could potentially be added at a later point, two people said.
In an early pitch deck to investors in the acquisition deal in May, seen by the Financial Times, Musk said he aimed for Twitter to bring in about $1.3bn in payments revenues by 2028. The pitch deck was first reported by the New York Times.
Data from payments markets data group FXC Intelligence show hundreds of thousands of Twitter users share links to third-party payments options either in their tweets or on their account. “Twitter is already a platform on which payments happen, so it’s kind of a no brainer,” said Lucy Ingham, head of content at FXC Intelligence.
Other payment experts have questioned whether Twitter can achieve a competitive scale, particularly in the US where there is stiff competition in the space from groups such as Venmo, Cash App and Zelle.
Twitter will also face high levels of regulatory scrutiny. The move into payments comes after Musk has culled more than half of the platform’s employees, which has raised fears that its compliance staffing is insufficient.
Businesses involved in money transfers, currency exchange or cashing cheques are required to alert unusual activity to authorities.
As part of monitoring for fraud and suspicious transactions, user accounts have to be directly linked to a user’s identity, according to Lisa Ellis, payments expert and senior equity analyst at research company MoffettNathanson.
Such regulations mean “many [tech companies] experiment and then give up”, she said. “They find it to be a burden to ultimately bear the long-term investment and risk — where you can get fined if there’s an issue and you have to have a whole compliance infrastructure that has to be constantly licensed.”