Elon Musk's plan to monetize Twitter is moving forward

As Elon Musk looks for new revenue streams to turn around the company, Twitter has started to apply for regulatory licenses across the US and design the software necessary to introduce payments across the social media platform. According to two people familiar with the company's plans, Esther Crawford, a rapidly ascending lieutenant of Musk at Twitter, has begun to outline the architecture required to enable payments on the platform with a small team. A key component of Musk's strategy to create new revenue streams is the initiative to start accepting payments through the website. Since he paid $44 billion for the platform in October, Twitter's $5 billion a year in advertising revenue has plummeted, with marketers blaming management and moderation. As part of a larger strategy to introduce an “everything app” that combines messaging, payments, and commerce, Musk has previously stated that he wants Twitter to offer fintech services such as peer-to-peer transactions, savings accounts, and debit cards. According to two people with knowledge of the team's work, Crawford's team is progressing, including creating a vault for storing and protecting the user data the system would gather.

Additionally, Twitter is moving ahead with the legal verifications required before announcing a payment service. According to a regulatory filing, Twitter registered as a payments' processor with the US Treasury in November. According to these sources, it had also started applying for some state licenses it would require to operate. One of the people stated that the remaining paperwork would be filed soon in the hopes that US licensing would be finished within a year. Thereafter, they continued, the business would look to grow by obtaining regulatory approvals abroad. Before Musk took over the business, Twitter had already established a subsidiary called Twitter Payments LLC in August last year. Musk recently appointed Crawford, Twitter's director of product management, to lead Twitter Payments. But to realize Musk's vision, we must confront fresh technological obstacles, heavy regulatory burdens, and eroded public confidence. It is also probably going to be expensive: according to one investor who received the offer, late last year, Musk approached Twitter's equity investors in a bid to raise more money, saying that some money would be used to fund a “hiring spree” of programmers to create a “super app” that could process payments. In addition, Twitter had been looking into some payment features related to tipping creators and e-commerce before Musk took over.

According to three people familiar with the plans, Musk's vision goes far beyond that and includes looking into additional avenues for users to directly pay other users, reward creators through the platform, and purchase goods directly. According to two people, Musk has stated that he wants the system to be fiat foremost, with the possibility of adding cryptocurrency functionality down the road. Musk said his goal for Twitter was to generate about $1.3 billion in payments revenues by 2028 in an early pitch deck to investors in the acquisition deal in May, which was obtained by the Financial Times. The New York Times broke the story about the pitch deck first. Hundreds of thousands of Twitter users share links to third-party payment options in their tweets or on their accounts, according to data from payments markets data group FXC Intelligence. According to Lucy Ingham, head of content at FXC Intelligence, it's a no-brainer because Twitter is already a platform for payments. However, in the US, where there is already fierce competition from companies like Venmo, Cash App, and Zelle, other payment experts have questioned whether Twitter can achieve a competitive scale.

Additionally, Twitter will be subject to intense regulatory scrutiny. Musk's decision to fire more than half of the platform's staff has led to concerns that the platform's compliance staffing is insufficient, leading to the move into payments. Businesses that handle money transfers, currency exchanges, or checks to cash must notify authorities of any unusual activity. In addition, according to Lisa Ellis, senior equity analyst at research firm MoffettNathanson and payments expert, user accounts must be directly linked to a user's identity to monitor fraud and suspicious transactions. According to her, “many [tech companies] experiment and then give up” due to these regulations.

“They find it to be a burden to eventually bear the long-term investment and risk — where you can get fined if there is an issue and you have to have a whole compliance infrastructure that has to be licensed constantly.”