LOS ANGELES — Billionaire Elon Musk surprised investors with a new revenue source — online payments directly on Twitter. Market reaction has been mixed.
In the transformation of Twitter’s business model, the company had begun to apply for regulatory licenses across and creating a software required to introduce payments on the platform.
One of Elon Musk’s high-ranking lieutenants at the company, Esther Crawford, was mapping out designs and structures to facilitate payments on Twitter with a small team, according to two people familiar with the company plans.
The moves allow payments through the site as one of the most crucial parts in fresh revenue streams that are in Musk’s plans for Twitter. The advertising sector for the social media giant bringing in $5 billion a year has fallen since the Tesla CEO had purchased it for $44 billion in October 2022. Advertisers have had major concerns over content and management due the issues of hate speech.
“Buying Twitter is an accelerant to creating X, that everything app,” tweeted Musk. At the time of the purchase of Twitter, the original price was at $54.20 per share.
This isn’t the first Musk has dealt with online financial platforms, where he co-founded X.com in 1999, the first online bank that was later PayPal. His plans for Twitter include fintech services includes peer-to-peer transactions, including savings accounts and debit cards, incorporating messaging, payments, and commerce.
Crawford’s team had been devising a vault for storing and protecting the user data that would be collected by the system, according to two people with knowledge of the team’s efforts.
Twitter had registered with the US Treasury as a payment processor, according to a regulatory filing. The company had also begun to apply for state licenses it would need to launch. The company had been meeting standards to push forward with regulatory check before launching the payment service.
As regulatory filing is pending, sources close to the company state that Twitter would seek to expand to gain regulatory approval abroad.
Twitter had expanded on subsidiary, Twitter Payments LLC, in August prior to Musk’s acquisition. He had appointed Crawford, who was Twitter’s director of product management, as the chief executive of Twitter Payments.
The ensuing challenge on Musk’s vision requires taking on the technological challenges, compliance burdens, and winning trust of the consumers.
The goals are more than like to be costly, where Musk approached Twitter’s equity investors to raise capital. The attempt to raise money would be used to fund a “hiring spree” of programmers to build an app that would process payments, according to one investor.
The company had explored to innovate payment features around tipping creators and ecommerce.
That vision that Musk holds goes far beyond that includes finding ways for users to reward creators, for users to buy items directory through the platform, and where users can pay one another, according to those familiar with the plans
Musk’s plan for payment structure will only include fiat currency. Cryptocurrency functions could be added on at some point, two people had said.
In an early pitch deck to investors in the acquisition deal in May, seen by the Financial Times, Musk’s goal was to have Twitter to bring in around $1.3 billion in payments by 2028. This pitch deck was first reported by the New York Times.
Data from payments markets group, FXC Intelligence, showed hundreds of thousands of Twitter users sharing links to third-party payment options in either 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.
Financial experts had questioned whether Twitter can compete with other vendors including Venmo, Cash App, and Zelle.
Twitter is expected to face high levels of scrutiny. The move into the payments business comes after Musk has cut more than half of Twitter’s staff, which has raised fears that of non-compliant staffing.
Other businesses involved in online banks are required to alert unusual activity to authorities.
“Such regulations mean many tech companies experiment and then give up,” said Lisa Ellis, a payments expert and senior equity analyst at MoffettNathanson. “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.”
As part of monitoring for fraud and suspicious transactions, user accounts must be directly linked to a user’s identity.
