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.”
Source: ft.com
