Twitter has begun applying for a regulatory license in the US and designing the software needed to introduce payments on the social media platform, as Elon Musk seeks new revenue to transform the business.
Esther Crawford, Musk’s fast-rising lieutenant at Twitter, has begun mapping out the architecture needed to facilitate payments on the platform with a small team, according to two people familiar with the company’s plans.
The recent move to allow payments through the site is a critical part of Musk’s plan to open up new revenue streams. Twitter’s $5bn-a-year advertising business has cratered since it bought the platform for $44bn in October, with marketers citing concerns about management and moderation.
Musk previously said he wanted Twitter to offer fintech services such as peer-to-peer transactions, savings accounts and debit cards, as part of a master plan to launch a “whole app” that integrates messaging, payments and commerce.
Crawford’s team is moving forward, including creating a vault to store and protect the user data the system will collect, according to two people familiar with the team’s efforts.
Twitter is also moving forward with reviewing the necessary regulations before launching a payment service. In November, Twitter registered with the US Treasury as a payment processor, according to a regulatory filing. It is also now starting to apply for some of the state licenses needed to launch, these people said.
The rest will be filed soon, with the expectation that the U.S. license will be completed within a year, one of the people said. Then the company will work on expanding to get international regulatory approval, he added.
While Twitter had created 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 chief executive of Twitter Payments.
But delivering Musk’s vision will require new technological challenges, significant compliance burdens and gaining consumer trust.
It’s also expensive: late last year, Musk approached Twitter’s equity investors to raise more capital, indicating that some of the money would be used to fund a “hiring spree” of programmers to build “super apps” that could process payments, according to one investor who received the offer.
Before Musk’s takeover, Twitter had been exploring some payment features around tip creators and e-commerce.
Musk’s vision goes beyond that, including exploring more ways for users to reward creators directly, for users to buy things directly through the platform and for users to pay each other, according to three people familiar with the plan.
Musk said he wants the system to be fiat, first and foremost, but built so that crypto functionality can be added at a later date, the two people said.
In the initial pitch deck for 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 revenue payments by 2028. The first pitch deck was reported by the New York Times.
Data from payments market data group FXC Intelligence shows that hundreds of thousands of Twitter users share links to third-party payment options in their tweets or on their accounts. “Twitter has become a platform for payments, so it doesn’t make sense,” said Lucy Ingham, head of content at FXC Intelligence.
Other payments experts have questioned whether Twitter can achieve competitive scale, especially in the US where there is already stiff competition in the space from groups such as Venmo, Cash App and Zelle.
Twitter will also face a high level of regulatory scrutiny. The move to payments comes after Musk laid off more than half of the platform’s employees, sparking fears that compliance staff are inadequate.
Businesses involved in money transfers, currency exchanges or check money must report any unusual activity to the authorities.
As part of monitoring fraud and suspicious transactions, user accounts should be directly linked to the user’s identity, according to Lisa Ellis, a payments expert and senior equity analyst at research firm MoffettNathanson.
The law means “many [tech companies] experiments then give up,” he said. “They find it a burden to bear long-term investment and risk – where you can be fined if something goes wrong and you have to have a compliance infrastructure that needs to continue to be licensed.”