(Kitco News) - Twitter will do what it takes to enable payments through the social media platform – including applying for regulatory licenses across the U.S. and designing the software that would be required to process payments.
According to a Monday report from the Financial Times, the move to integrate payment capabilities comes as Twitter CEO Elon Musk searches for new revenue streams to help bring the company back into profitability.
Musk has long hinted at the possibility of enabling payments through the platform, and now it appears to be a critical part of the billionaire’s plan to create new revenue streams after Twitter’s $5 billion per year advertising business has seen material declines since he purchased the platform in October.
Concerns over management and moderation of the social media platform have led some companies to pull their advertising until they can evaluate the direction that Musk is taking Twitter.
The integration of payments aligns with comments previously made by Musk – including a desire to offer fintech services such as peer-to-peer transactions, savings accounts and debit cards – as part of a broader plan to create an “everything app” that incorporates messaging, payments and commerce. Many of these ideas stem from Musk’s previous work in helping to co-found X.com, one of the first online banks which eventually became part of PayPal.
Late in 2022, Musk made a bid to raise more capital from Twitter’s equity investors with the goal of hiring a team of programmers to build a “super app” that could process payments.
Leading the Twitter team focused on creating the architecture needed to facilitate payments is Ester Crawford, a “fast-rising lieutenant to Musk inside Twitter.” Together with a small team of researchers, Crawford is working on devising a vault to store and protect the user data that is collected by the system.
The company is also moving forward with regulatory checks needed before launching a payment service, the report said. In November, Twitter registered with the US Treasury as a payments processor, according to a regulatory filing. It has also begun to apply for some of the state licenses needed in order for it to launch, two people familiar with the matter said.
Twitter is hoping to obtain licensing in the U.S. within a year, at which point the company will seek to expand and obtain international regulatory approval.
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Prior to Musk’s takeover, Twitter established its Twitter Payments LLC subsidiary and began exploring the introduction of payment features to enable e-commerce and the tipping of creators. Musk now looks to expand on this previous work, exploring more ways for users to reward creators directly, buy items directly through the platform and pay one another, the report said.
According to several sources, Musk has stated that the system should ideally operate via fiat, first and foremost, but should also be built so that crypto functionality could be added at a later date. A pitch deck that Musk sent to investors as part of the acquisition deal in May said that he is aiming for Twitter to bring in roughly $1.3 billion in payments revenues by 2028.
But the road ahead for Twitter is by no means an easy one, as the competition in the payments field is stiff with companies like Venmo, Zelle and Cash App already firmly established. This has led some payment experts to question whether the social media platform will be able to achieve a competitive scale, especially in the U.S.
The platform also faces a high level of scrutiny from financial regulators as it would be required to alert any unusual activity to authorities. According to Lisa Ellis, payments expert and senior equity analyst at research company MoffettNathanson, many companies that explore the ability to facilitate payments ultimately abandon those aspirations due to the risks involved and the requirements needed to maintain licenses.
