Payments Briefing: What we know so far about Twitter’s payments plans
- This week, we explore Elon Musk’s plans for Twitter’s entry into the payments market.
- We also take a look at Citi’s new integrated solution for institutional billers.
It’s almost hard to believe that it’s been just three weeks since Elon Musk officially completed his $44 billion acquisition of Twitter. Since then, he’s made a whole host of changes at the company, from slashing half of its workforce to devising a shaky plan to charge users $8 a month to get a verification checkmark on their profiles.
More recently, in a livestreamed meeting with Twitter advertisers last week, Musk laid out his long-term vision for bringing payments to Twitter – which could include offering high-yield money market accounts, debit cards, and peer-to-peer transactions.
The New York Times also reported that Twitter had filed paperwork with the Treasury Department to become a payments processor prior to Musk’s announcements.
Musk’s relationship with fintech and payments goes all the way back to his early tech days: in 1999, he co-founded X.com, one of the first online banks, which later became part of PayPal.
So, what kind of details did Musk share regarding his payments plans for Twitter, and how feasible are these plans?
Forbes contributor Daniel Webber has done a great in-depth review of Musk’s key payments-related proposals. Here’s how he breaks them down:
Monetizing content on Twitter
At the core of what Musk has so far outlined for payments on Twitter is the ability for creators to monetize the content they share with users on the platform.
This would see Twitter target a number of platforms like Patreon, through which creators share multimedia content such as videos and podcast episodes with subscribers for a fixed or tiered monthly fee.
However, Musk described this more as an on-demand solution, similar to the paid-for videos available through platforms such as Vimeo and YouTube. This would see users pay to access individual videos or other content as and when they wished to access them, without needing to leave the Twitter ecosystem.
Such a service would need to be underpinned by a payments system that could handle frequent, low-value payments, with Twitter likely to take a cut of each. This would make it closer in functionality to the payments systems used by Apple and Google on their respective app stores – and the company may opt to make use of existing payments partner Stripe for the service for non-app users.
P2P money transfers
The use of content monetization may potentially include a digital wallet facility to enable users to hold a balance for future purchases – and here Musk sees potential in building on this to provide P2P money transfers between Twitter users.
The concept of P2P payments on Twitter could potentially be a strong one. FXC Intelligence previously estimated that the daily active Twitter users that the company considers monetizable sent an estimated $30 billion in remittances in 2021. And while many of the recipients are likely to not be Twitter users themselves, that still speaks to a strong total addressable market to access.
There is also the potential of using P2P payments to tap into the payments market that already exists on Twitter. Through the platform, millions of dollars are sent every month to creators in the form of tips, as well as for donations to individuals and small businesses.
However, while there is potential for P2P payments on Twitter, their success will largely depend on how they are implemented, particularly given the extensive KYC requirements the platform will need to comply with, as well as the strong levels of user trust it will need to engender.
A “money market account”
The final part of Musk’s initial payments proposal for Twitter, which he describes as the “next step” after P2P money transfers with payouts to bank accounts, is an alternative financial account within the platform.
“The next step would be to offer an extremely compelling money market account,” he said. “Get extremely high yield on your balance. Then why don't we cash into Twitter? Great, that sounds like a good idea. Then add debit cards, checks and whatnot.”
Of all of Musk’s payments-related proposals, Webber believes this is by far the most challenging to implement. Musk didn't offer any real insight into how this service would provide a high yield, as holding money and enabling it to be spent via debit cards are typically not areas where e-money products and neobanks make their money.
This suggests that the service would need to either be a significant loss leader to encourage users to store and spend money on the platform, or would need to include loans, trading or other services where Twitter could make money from such a service.
Furthermore, there are major compliance challenges involved in setting up this kind of service. If Twitter wants to operate a full banking service, it will need to gain banking licenses in every jurisdiction it operates in – including one for every US state. This process takes years to complete, and companies that enter the space generally partner with fully licensed players in order to get their service going.
Of course, it’s important to remember that none of these plans are set in stone. Many of the new developments being contemplated at Twitter are subject to change, and some of them may not materialize at all. “Please note that Twitter will do lots of dumb things in coming months,” Musk tweeted last week. “We will keep what works & change what doesn’t.”
Nevertheless, the move to enter payments is a central part of Musk’s broader vision of turning Twitter into a supper app he plans on calling 'X'. While the plan is still a bit vague at the moment, the general idea is to combine payments, social networking, entertainment, and more into one experience – similar to WeChat, the Chinese social media giant with over a billion users that has displaced AliPay as the most widely used payment service in the country.
Twitter's plans to integrate payments into its platform aren't surprising, according to Suneera Madhani, co-founder and CEO at Stax. She says Musk has been pretty public about his ambitions to use Twitter to create an "everything app" where users can socialize, shop, or send and receive money.
"This move especially makes sense today because software investing has seen a recent decline amid our current economic uncertainty, while embedded payments bring new opportunities to generate revenue at the company," she told me. "Allowing creators to monetize their content via subscription payments, for example, can open up a new revenue stream for the site if they get a cut of those subscriptions, so both the creators and Twitter can benefit."
A closer look at Citi's new integrated solution for institutional billers
For incumbent FIs, adopting and managing digital tools is an uphill battle that involves a variety of challenges from both external and internal environments.
The increasing pace of change in the payments ecosystem – driven by a stream of new payment methods, regulatory changes, security challenges, and other local factors – increases the complexity of managing payments.
Despite the hurdles, many traditional banking institutions are developing and implementing digital payment offerings to align with the growing needs of their customers.
Citi is the latest among incumbent banks to augment its digital offerings. The bank has integrated its digital payment service – Spring by Citi – into Citi Present and Pay, its electronic bill presentment platform.
Spring by Citi is a digital payment service that enables e-commerce and B2B funds flow. The service provides different modes of payment to businesses that are connected with the bank’s back-office treasury management systems and cash management solutions.
The new solution offers Citi’s institutional clients a simpler way to collect payments across a range of US payment methods, in addition to providing digital billing capabilities to their customers – both through a single technical integration.
This move aims to address the pain points associated with accepting digital payments for Citi’s institutional billers. These may include the lack of resources to upgrade in-house systems from time-intensive, paper-based processes, or the scarcity of resources to support integrations with third-party providers in order to manage digital payments on their behalf. This cost and complexity can be a barrier, making it difficult for institutional customers to accept digital payment methods that their customers want to use.
With the rapid pace of change and innovation in the B2B payments category, solution providers across the board have the scope to do more in order to improve the experience for their institutional clients.
This can be accomplished by making it easy for clients to accept a range of card payment methods and non-card payment methods including digital wallets, and offering flexible solutions that span multiple new payment channels (e.g. pay by link, QR code), as well as fulfilling the special payment data needs of clients in certain verticals (e.g. support for L2/L3 data, surcharging).
As Banking-as-a-Service is opening the door to new sources of growth across the industry, Citi plans to continue to build its BaaS offerings going forward. It aims to provide cash management strategies to companies, such as managing incoming and outgoing B2B payments, streamlining reconciliation, and providing visibility across the ecosystem.
Highlights from our recent coverage
Power of Payments Ep. 18: Chase disrupting rent payments, MoneyGram’s crypto expansion, and more
This week, we discuss why JPMorgan Chase is launching a digital rent payment solution, and how Americans plan to use more flexible payments this holiday season. We also talk about MoneyGram’s recent crypto expansion, and the potential role of digital currencies in the remittance industry.
PayPal continues to report slow user growth, focusing on monetization
PayPal recently reported its third-quarter results, beating market expectations on both top and bottom lines. However, much of the focus went towards its stagnant user growth figures, which left the market pondering over the firm's strategy through the market downturn.
Embedded Briefing: Bright prospects for B2B payments; BNPL attracting investments
As SMBs increasingly adopt e-commerce solutions for purchasing, payment methods like B2B BNPL are becoming more attractive. Given that delayed payments are a regularity in the industry, the BNPL protocol can add a valuable option to the existing standards.
A tale of two phones: A day in the life of Ankur Sinha, CTO of Remitly
Ankur Sinha is CTO of Remitly, a fintech focused on international money transfers. For Ankur, being tech-focused doesn’t mean losing sight of the customer – or missing out on family time. With an early start and a steady routine, here’s how he makes it work.
What we're reading
- American Express and Square team up on new credit card for sellers (PYMNTS)
- Klarna CEO accuses media outlets of "hypocrisy" over treatment of BNPL (AltFi)
- Former PayPal CEO Bill Harris shuts down latest startup weeks after launch (Finextra)
- Visa brings face payments and animated digital cards to FIFA World Cup (Finextra)
- A 'credible alternative to Google and Amazon': Klarna brings its price comparison tool to Europe (TechCrunch)
- JPMorgan and Mastercard unveil pay-by-bank service (Finextra)
- Goldman Sachs, eager to grow cards business, courted credit card technology firms (WSJ)
- New York Fed tests wholesale CBDC for cross-border payments (Finextra)