Can Elon Musk, a PayPal founder, make Twitter a payments platform?

Twitter's quest to monetize its large user base includes several potential financial services, but the company faces a crowded market that is rarely friendly to payment products from social networks.  

"There's tremendous potential that's untapped at Twitter. There's a lot of new directions," Elon Musk, Twitter's CEO, said during a Twitter Spaces broadcast on the social media platform on Wednesday.

Twitter Payments LLC has applied for a money transmitter license with the Financial Crimes Enforcement Network, a move that would permit the company to offer payment services such as a peer-to-peer app. 

Twitter's past forays into financial services have often met with controversy. Twitter's "tip jar," which allows links to third-party payment sites, has raised concerns over privacy. And Twitter phased out an earlier BigCommerce-supported "buy button" in the late 2010s, saying it was deemphasizing e-commerce. Twitter was also hit with a large cyberattack in 2020 that compromised some user accounts.  

Meta, which operates Facebook, has had similar struggles with payment products. The company sold off assets tied to the Diem stablecoin following years of political and regulatory pressure on the Facebook-affiliated digital currency, often along privacy and security lines. 

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"Consumers don't associate social apps with payments, particularly in the U.S.," said Daniela Hawkins, managing principal at Capco. "There's an opportunity to change user behavior but old habits die hard."

The market for payment apps is crowded, but there is still an opportunity for innovation, given digital payments still lack a good user experience because they often require navigation between apps, according to Hawkins. 

PayPal's Venmo seems to be the exception, since it allows users to share their spending in a Twitter-like feed. But Venmo never had the baggage of being led by a high-profile and controversial tech figure such as Elon Musk or Mark Zuckerberg. And Venmo is still first and foremost a payment app, not a social media app.

"U.S. consumers are more leery of social media apps," Hawkins said, noting other issues such as disinformation and the association of social media apps with political polarization. 

The X factor

Musk, whose X.com bank was a key component in the creation of PayPal more than 20 years ago, linked Twitter's potential financial services features as growing out of a Patreon-style product that could fund content creators. The creators could use a peer-to-peer app to funnel money to bank accounts, setting the stage for a broader Venmo-style interface. 

"The next step would be to say, 'Let's offer a money market account,' " Musk said, adding the $8 monthly blue checkmark fee would be an enrollment path for storing card credentials. "And then we can add debit cards and checkout accounts. Make the system as useful as possible. The more useful and entertaining Twitter is, the more people will use it."

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Twitter also plans to improve its advertising business, with Musk hinting at a "buy button," though he did not provide many details. The goal is to match advertising and other content as closely as possible to a user's desire to make a purchase that they want. 

In addition to Venmo, Twitter faces competition from the bank-supported Zelle peer-to-peer network  and Square's Cash App. Venmo and Cash are central to PayPal and Square's quest to build financial "super apps," or a single tool that acts as a hub for banking and payment services.

Cash, for example, supports Square's "two-sided" strategy that includes products for both merchants and consumers, as well as Square's crypto trading business. Venmo and PayPal's traditional payment services also form the basis of PayPal's super app, including products such as merchant credit and crypto trading.

Other technology firms are also pursuing the concept of a super app, which has its roots in China, where WeChat and Ant have used this model for years. Apple's Goldman Sachs partnership has allowed the technology company to use its enrolled mobile wallet credentials to speed card issuance and offer access to both financial and non-financial services. Fintechs such as Revolut, crypto exchanges like Coinbase and retailers such as Walmart and Amazon are also building financial services businesses.   

Musk admitted some ideas may not work, and there is a need for more innovation to support all of the services Twitter may offer.

"For merchants, we have a lot to do on the software side, we're going to write a lot of code," Musk said. "If you can buy things quickly and effortlessly on Twitter with one click, that's great." 

Twitter did not announce specific payment or financial service products, and could face regulatory challenges if and when it does, Hawkins said. 

"Money movement has always been heavily regulated," Hawkins said, adding Twitter would likely have to partner with a bank to provide a high-yield savings account, or apply for an industrial bank charter. Twitter did not provide comment for this article. 

How it could work

Twitter's scale could provide a valuable base for a future payments business. Twitter has about 340 million users, according to InsiderIntelligence, which also reports the site is losing about 1 million users per month for a variety of reasons, ranging from an effort to reduce fake accounts to a decline in news interest as the pandemic winds down. A substantial but stagnant base creates pressure to find new sources of revenue. PayPal, by comparison, has about 430 million users, according to Statista. 

"A successful Twitter P2P payment network might generate incremental payments, but it would also take payments share from Cash App, Venmo and Zelle," said Eric Grover, a principal at Intrepid Ventures.

Payment services will become a new revenue model for Twitter subscription services such as premium, no-ads and verification services, or even rewards that could allow community members to pay directly to individuals for specific contributions, according to Stefan Rusk, CEO of Laguna Labs, a web technology company. 

"Enabling such payments means that, in addition to using fiat currencies, new payment rails on the Web3 network will be activated so that users can pay in any currency, from U.S. dollars to Dogecoins," Rusk said. 

Twitter could also play a role in the maturation of crypto payments, according to Rusk. Musk's personal activity in cryptocurrency — his crypto pronouncements have often caused market swings —  makes him a brand within the cryptocurrency market. Musk is also CEO of the automaker Tesla, which has supported cryptocurrency for car payments. 

"The adoption of crypto as a payment mechanism will equally grow thanks to the Twitter user base being allowed to pay and use crypto rails," Rusk said. 

Musk, whose commentary on Wednesday was more of a casual discussion than the formal presentation of a product pipeline, tied Twitter's nascent payments business to other efforts to police content. Musk spent most of the broadcast defending the company's new fees and asserting that its content controls would remain the same, following days of criticism over Musk's own political tweets and firing about half of Twitter's staff. Several high-profile advertisers, including Volkswagen and General Motors, have pulled their ads in the past few weeks. Twitter's security and quality vetting will also be tied to how its e-commerce and payments system would work, Musk said. 

Musk defended Twitter Blue, an $8-a-month subscription service that supports account verification and a blue checkmark that is visible on users' profile pages. The charge is a gird against trolls, bots or fake accounts, Musk contended. 

"It's not just the money," he said. "Trolls don't have a million credit cards to set up a million accounts, or a million phones."