This news is more than just hearsay. Twitter registered in November to be a money transmitter with the U.S. Treasury’s Financial Crimes Enforcement Network and is now applying for further regulatory licensing. Twitter has also appointed Esther Crawford, former Director of Product Management to lead its Twitter Payments team.
Given Musk’s background with X.com and PayPal it makes sense that payments would eventually enter the Twittersphere as a product. Given the rise of social commerce, larger technology companies such as Apple and Google moving into payments, and “Super Apps” such as Alipay and WeChat, Twitter Payments is ambitious to say the least.
The company plans to enter a payments market that is highly competitive with contenders that have decades of experience and a firm standing in the market. In an incredible stroke of payments irony, Musk will be taking on his former company PayPal, particularly their Venmo app, which is one of the most successful P2P apps in the marketplace today. PayPal also has nearly double the customer base of Twitter. As of Q2 2022, PayPal had 429 million active accounts, while Twitter reported 237.8 million active users. Analyst firms are also forecasting a decline in Twitter’s customer base citing the platforms infrastructural and content moderation problems.
The launch of Twitter Payments will help alleviate some of the revenue loss from large global brands pulling ad spend during the acquisition, but will it be enough to fill the holes on a sinking ship? The massive layoffs in 2022 marked a turning point in the company’s strategic future, but it has us questioning if Twitter has enough employees to successfully deliver on Twitter Payments.
Another major problem is generating trust as a financial services provider. Earlier this month, Twitter was in the news for a massive data breach and it has had its share of cybersecurity issues in the past. For consumers, transacting on an e-commerce site is now commonplace, but storing your money with a social media platform (Musk did propose a high-yield money market account) is a whole other range of emotions. When the product launches, it will take time for Twitter Payments to garner trust, which is not simply something that happens over a few tweets.
Overview by Ben Danner, Research Analyst at Mercator Advisory Group.