Twitter PaymentsElon’s Plan to Turn X Into a P2P Payments Platform

September 15, 2023 | 7 min read

This image was created by artificial intelligence using the following prompts:

'X' on an iPhone with cash money all around. In the style of red and teal. (X logo added)

Twitter Payments

In a Nutshell

Elon Musk's latest move to rejuvenate X (formerly Twitter) and ramp up profits centers on reshaping it into an “everything app.” Musk promises to begin by seamlessly integrating financial services into the platform. But, this maneuver swiftly follows his high-stakes acquisition of Twitter and a string of online exploits that burdened the company with debt and drove advertisers away. Could it work? Let’s take a look.

How Will the Social Media Platform’s Integrated Payments Feature Play Out?

Since acquiring Twitter back in October 2022, Elon Musk has adopted a general strategy of throwing ideas against the wall to gauge their stickiness. However, Musk’s recently announced plan to bring X (formerly Twitter) into the payments realm might be more than a passing idea. 

Sources mentioned by the Financial Times reveal that Musk envisions giving users the ability to make purchases directly on the platform and engage in peer-to-peer money transfers. The primary foundation of this system will be traditional fiat payments, although the potential to integrate crypto capabilities remains on the table.

The concept is in line with an ambition he’s had for many years. In the early days of Paypal, Musk envisioned the platform as an all-in-one “everything app.” The Twitter acquisition has given him a second opportunity to build his envisioned platform.

These proposed additions will necessitate meticulous compliance with numerous regulatory hurdles. However, X has already obtained registration as a payments processor with the US Treasury. They’ve also begun acquiring essential regulatory licenses within the United States. So, the launch of Twitter payments may come sooner than any of us initially thought.

The Background

Twitter Payments

As mentioned above, Elon Musk's aspirations of fashioning into a super app are longstanding.

According to Walter Isaacson, when Musk launched the online bank back in 1999, his original vision was to mold the platform into an “all-in-one marketplace for all financial requirements.” This venture would eventually ditch the branding, evolving into what we recognize today as PayPal.

Fast forward to 2023, and is making a resurgence, poised to supplant Twitter with an even more ambitious objective. As Musk claims, “In the coming months, we will introduce comprehensive communication features and the capability to manage your entire financial universe.” He added that, “Given this broader scope, the name Twitter no longer aligns, necessitating a farewell to the iconic bird logo.”

X's ambitions extend beyond mere payment processing for its user base; it also aims to reward them for their content creation efforts within the platform. Subscribers of the formerly labeled Twitter Blue were notified in mid-July that a portion of the network’s advertising revenue would be distributed to them. Numerous users reported receiving substantial sums, often reaching into the thousands of dollars. Further, Musk stated on July 22 that the company would soon implement revenue sharing for ads displayed on profile pages, a move he anticipates will "approximately" double the payouts.

During a recent podcast, Musk said he envisioned an all-encompassing operating system akin to iOS or Android, consolidated into a single app. Tasks may span from texting a friend to catching up on breaking news, grabbing a burger, suit shopping, and paying rent. Imagine, instead of juggling a hundred apps on your phone, you'd simply have one, aptly named “X.”

“If done right,” Musk said, “X would serve people’s financial needs to such a degree that over time, it would become, I don’t know, maybe half of the global financial system.” 

What’s the Timetable for Twitter Payments?

Twitter Payments

Musk articulated his vision for Twitter in a live broadcast last October. Alongside discussions about enabling monetization for content creators, he painted a picture of X as a versatile platform. It would be a place where users could shop for products,  and also seamlessly conduct payments and transactions using linked debit cards and bank accounts.

Musk and his team have since begun navigating the landscape of payment licenses across various states. At the same time, they’re working to devise the necessary software infrastructure for integrating payments throughout the social media platform.

Fast-forwarding to July 2023. Reports emerged that X had successfully obtained licenses for money transmission in Michigan, Missouri, and New Hampshire. This suggests the project is coming along at a substantial pace, and the company is finding success with navigating regulation.

The idea that X will offer core banking services is still a far-off vision. However, integrating payment functionalities into its existing platform unlocks the potential for diversifying its revenue streams beyond advertising. This strategic shift could serve to lessen the company's reliance on ad-generated income, ultimately paving the way for a more sustainable and robust business model.

Trust Will Be Essential

Musk isn't the sole tech luminary recognizing the potential presented by a super app in the US landscape, though. Meta Pay facilitates money transfers through Messenger. TikTok is rumored to be on the brink of launching an eCommerce venture, and Snapchat once ventured into housing mini-apps within its platform before ultimately abandoning the pursuit.

That said, X diverges from conventional fintech firms in terms of its target audience and its underlying business model. The app operates within a closed-loop framework, essentially a self-contained marketplace where user posts already possess the intended audience or market segment within the platform itself. 

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Integrating payment processing into X's ecosystem could elevate user engagement. People might find it more expedient to make purchases and financial transactions directly with their fellow users on the platform. A streamlined approach like this could even foster higher conversion rates for X-savvy merchants.

Nevertheless, X faces a formidable challenge in attracting new users, given the prevailing dominance of established payment processors such as PayPal and Stripe. These brands have already solidified their foothold and customer base in the industry. However, due to X's strategic focus on an ecosystem approach, its ultimate success hinges on its capacity to sway its existing user base of 396.5 million users towards adoption.

Compliance & Regulation Issues?

Twitter Payments

Entering the financial services arena offers opportunities, but it also means dealing with complex regulations that vary across countries.

X’s recent approval to function as a money transmitter in select states is a step toward its goal of expanding into financial services. That said, execution won't be easy. Tech companies have struggled with banking products due to competition, regulations, and approvals.

For instance, Facebook's 2019 project, Libra (now Diem), aimed at global digital currency for its ecosystem. However, that initial attempt failed due to regulation-related setbacks. Peer-to-peer transactions in social media platforms also faced challenges. Facebook's Messenger payment feature was introduced in 2015, but fell short compared to platforms like Venmo and Zelle, and was discontinued after a few years.

Consumers are increasingly ready to adopt mobile payment apps as virtual bank accounts. 84% of individuals have used some kind of peer-to-peer payment service. Regardless, concerns about fraud, regulatory scrutiny, and the absence of FDIC insurance coverage persist, clouding this evolving landscape.

Could X Become the Next Big Thing in Payments?

Even if the X app undergoes significant enhancements, numerous users have lost faith in the platform for various reasons. Verification now seems purchasable rather than earned, and Musk's endorsement of controversial conservative figures has raised concerns. Additionally, the quality of ads on the platform appears to have deteriorated.

Twitter is also encountering formidable competition within its core domain of text-based microblogging. Meta's Threads service gained substantial initial traction, but is fizzling out. TikTok has recently introduced text posts, and federated platforms such as Bluesky and Mastodon are fostering burgeoning communities.

Predicting whether X can successfully transform itself into the American equivalent of WeChat remains premature. Variables including shifting consumer preferences, a competitive payments landscape, and regulatory considerations abound. Plus, there are technical complexities and diverse use cases to consider, which may gradually provide more insight into the trajectory that lies ahead.

Musk’s gamble is that users will want a super app to handle everything on the internet. With social media on the fence about safe spaces to share thoughts, ideas, and content, mixed with X’s already turbulent track record — it’s still up in the air whether users will take his bet.

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