Can Elon Musk turn Twitter, a social media platform that’s as much a lightning rod for controversy as its new owner, into a payment company? Or, beyond that, into something like a bank?
Musk was one of the founders of PayPal, so he knows something about payments. His SpaceX puts satellites into space, runs the Starlink space-based internet system and has branched into military contracting. He got Tesla rolling, a company that until recently accounted for most of the sales of electric vehicles in the United States.
But there’s substantial doubt that even he could get a Twitter payments program, or a Twitter “bank,” off the launch pad. Even industry observers who have been enthusiastic about outsiders tackling the banking business are skeptical.
Should bankers fret that he still might do it? Consider that many once dismissed PayPal as a fringe idea. But it’s now a mainstay that continues to expand its payments footprint.
There’s an urgency here. The advertising model hasn’t worked for Twitter, and steady profitability has been elusive, says Heidi Liebenguth, managing partner at Crone Consulting.
“Musk knows that a new business model, based on payments, could make it profitable,” she says. “One would expect him to introduce payments to Twitter, because it has a built-in global base. Payments is monetizable beyond advertising.”
After he won the battle for Twitter, Musk held a town hall meeting with employees and sketched out possible plans in financial services, saying he envisions Twitter as “the people’s financial institution.”
The details he shared expanded on vague references he’d made previously, though not by much. It also got experts’ analytical juices going, projecting what Musk might try.
Skepticism About Musk’s Payments Foray Abounds
“It immediately seems to me to be farcical,” says Jason Mikula, consultant and publisher of Fintech Business Weekly. Mikula says that most people he knows aren’t even on Twitter. But they already use Zelle, Venmo or CashApp. So where is the incentive to sign up for Twitter payments?
“This is Elon Musk grasping at straws,” says Alex Johnson, creator of the Fintech Takes newsletter. The need to find something that will turn Twitter into an earnings powerhouse has him looking at payments and banking as a lever for profits, but it’s not even clear what he sees as Twitter’s role.
Others point out that there’s a difference between “can” and “should.” Technical ability is not destiny.
“Can Elon Musk pull it off? Absolutely. But the challenge will be convincing the public that Twitter is a safe place to do something beyond sharing an opinion.”
— Jordan Hirschfield, Mercator Advisory Group
Musk has the PayPal experience under his belt, but that doesn’t mean the public thinks tweets and dollars mix. A platform plagued by misinformation and bots — and the controversy that Musk’s chaotic management style adds to the mix — is not likely to inspire mainstream trust anytime soon. Social media in general suffers from a lack of public trust: In a fall 2022 survey by Morning Consult, 61% of respondents said they trust traditional banking institutions, but just over half that — 34% — trust social media.
This yellow light can’t be dismissed when the banking industry’s own peer-to-peer payments effort, Zelle, continues to suffer from bad PR. Customer losses due to fraudulent transactions have reached such proportions that the industry is attempting to devise a scheme for reimbursing some victims.
Some suggest a Twitter payments service could easily become a haven for fraudsters. Consider Musk’s own anger over the fact that “we’ve got a million fake accounts.”
Twitter’s founder, Jack Dorsey, also founded Square, the payments company, since renamed Block, which includes the CashApp P2P service. Mikula notes that at one time Dorsey’s interest in payments and blockchain was so strong that many speculated he would merge Square with Twitter. In time, he delegated the leadership of Twitter to focus on Square. Other than a payments setup for “tips” for Twitter creators that requires use of third-party companies to complete the payment, Twitter doesn’t do payments, yet.
Whatever Musk tries, he will “go big,” says Jordan Hirschfield, director of prepaid advisory services at Mercator Advisory Group, a payments consultancy. Hirschfield suspects Musk will have to in order to make a dent in its profitability challenge — but Twitter would be handicapped by being late to the payments game.
Read More About Musk’s Style: Elon Musk’s Twitter Takeover: Lessons for Bank Leaders
Is Musk on the Verge of a Big Solution?
There’s also another side to the discussion. Far more enthusiastic about Twitter in financial services is payments consultant Richard Crone, head of Crone Consulting.
“Elon Musk likes to explore new markets, new products, new ways of doing things,” says Crone, adding that Musk’s track record indicates he can make things happen. Crone thinks Musk may have designs on competing, in time, with the likes of the Apple Card and the multiple products that it has branched into. He sees huge potential if Musk goes in that direction. (Crone detailed what a Twitter financial foray could look like and how it could pay off, which we’ll get to later.)
If nothing else, Musk certainly has momentum. By taking Twitter private, Musk has solidified his control of the company, and barnstormed his way through remaking the rules and the staff to his liking, notwithstanding the controversy erupting over every move. But not all irresistible forces succeed.
Here’s what Musk has had to say so far, along with some thoughts from experts interviewed on the various ways Musk may be planning to get into payments with Twitter and, finally, Crone’s thinking on how Musk could shake up both payments and social media.
Elon Musk’s Rough Sketch of ‘Bank of Twitter’
The most concrete information about Twitter in the payments and banking space comes from Musk. After his town hall meeting with Twitter staff, The Verge obtained a leaked recording of the event and published a transcript.
Musk sketched out his ideas, rather than disclosing a detailed blueprint. Some highlights:
• The principle: Musk told staff that he sees payments as an exchange of information, with “not a huge difference” between just sending a direct message on Twitter and sending a payment. He said that the company will move towards enabling Twitter users to be able to send money to anyone, anywhere, “instantly and in real time.”
• The skeleton: “The full answer to the payment story is complicated,” Musk said. However, he spoke of a structure in which every verified Twitter user would get some money put into an account, which they could send anywhere. It’s almost like payments “cloud seeding.”
“Give them some amount of money, like ten bucks or something, that they can send anywhere in the system,” Musk said, according to the transcript posted by the Verge in mid-November 2022. “We need money transfer licenses for that, which we’ve applied for.”
As Musk outlined the concept, deposits would be placed into a high-yield money market account. A positive balance would earn a higher rate than available elsewhere. Falling into a negative balance — or, in banking lingo, overdrawing an account — would result in a charge, but Musk contends it would be a lower amount than is typical for financial institutions.
Twitter accounts could include a debit card for transactions with merchants who don’t accept Twitter payments directly. In addition, customers who need some checks would be provided with them. Automatic payments would also be enabled.
• The teaser: Said an employee: “It sounds like more of a bank. Do you also foresee us loaning?” Musk: “Well, if you want to provide a comprehensive service to people, then you can’t be missing elements.” He also said that hopes to make Twitter more friendly for ecommerce hinged on devising a good payments effort.
What’s the appetite for this? That’s a half empty, half full matter.
Research published at the end of 2021 by Morning Consult found that 23% of consumers surveyed — one out of five — had made some sort of social media payment directly through a social platform. The same study found that 23% of the sample had used a buy now, pay later service. But many more — 42% — had paid for something using a digital wallet such as Apple Pay, Google Pay or Shopify’s Shop Pay.
Read More: What the Apple Card High-Yield Savings Account is Really About
Is a ‘Super App’ Strategy Waiting in the Wings?
Some have read the broad outline of what Musk discussed as a hint that what he really still wants to launch is a super app.
“Every tech CEO is convinced Americans want a super app. There’s no evidence of that.”
— Alex Johnson, Fintech Takes
Johnson says that there isn’t even any evidence that many people in the United States favor keeping all of their money in one place. The trend, he says, has been for fintechs to unbundle financial services. “Re-bundling,” while predicted as a countertrend, hasn’t happened on a large scale yet.
“People don’t move their money around as much as disruptors would like them to,” says Johnson.
Musk didn’t touch directly on this in the recent Twitter town hall, but he did in a leaked transcript published in the summer of 2022 on Vox from an earlier meeting held before the final deal for Twitter went through. He spoke at length about the Chinese super app WeChat:
“WeChat in China [is] actually a great, great app, but there’s no WeChat movement outside of China. And I think that there’s a real opportunity to create that. You basically live on WeChat in China because it’s so useful and so helpful to your daily life. And I think if we could achieve that, or even close to that with Twitter, it would be an immense success.”
WeChat, as recounted in a column published at the time of the leak by Jim Marous, co-publisher of The Financial Brand, goes beyond payments. Marous, also host of the Banking Transformed podcast, noted that WeChat includes instant messaging, sharing updates, buying goods and services, booking a ride-share, mapping a route, making (and receiving) payments, among many functions.
In tweets this past summer, Musk spoke of Twitter being “an accelerant” to produce “X, the everything app,” taken to mean a super app.
Something to watch for: Musk has been saying in recent interviews that Twitter users should be able to transact in either digital or traditional currencies. Rumors suggest Twitter may be working on its own digital currency as well, but that’s an idea that flopped for Facebook.
Read More: Marcus by Goldman Sachs Finds That Building a Retail Bank is Tough
How Twitter in Financial Services Could Shape Up
Experts read the tea leaves from the most recent town hall and comments dropped over time in different ways. Much will depend on whether the effort is designed to be contained within the world of Twitter, relies on Twitter membership but goes outside the platform’s “ecosystem,” or works through some means of turning a Twitter “handle” into a trusted payment credential that could be used in other venues.
But before getting into some alternate scenarios, consider that there are concerns raised in general about Twitter trying to do financial services.
• Not a Washington favorite. Complicating things for any fledgling Twitter financial effort is that “Elon Musk is an incredibly polarizing figure,” says Mikula. Johnson points out that Musk already has a contentious relationship with Washington, which could complicate any plan to enter payments or banking.
Some have suggested that acquiring or starting a state-chartered industrial bank could be a way into the business, but that’s far from a surefire strategy. Whether a Musk enterprise could obtain deposit insurance from the Federal Deposit Insurance Corp. would be a Washington decision. Nonbank attempts to obtain such coverage have had mixed results. Square succeeded. But other efforts failed.
• Who will pay for high yields? Paying interest on high-yield deposits would be a curious proposition.
At the interest rate levels available in late 2022, Twitter would have to be paying 4%, 4.5% or even 5% to make an impression. And reports hold that the Federal Reserve is prepared to allow rates to rise further yet.
“I’m not sure where Musk thinks the money is going to come from,” without a meaningful lending effort, says Johnson. And Hirschfield notes that with a recession in the offing and credit defaults already rising, this isn’t the time to expect to build a successful consumer lending business.
The source of interest payments is an issue that can’t be ignored for a company whose long-term solvency is already being questioned, says Mikula. Some experts point out that Apple will be funding its Apple Pay Later program directly from its balance sheet, but Apple has many fat income streams.
The main Twitter income source at present is advertising. That has been even more troublesome since Musk took over and the likelihood of recession makes it even iffier. Musk himself spoke of having “recession PTSD” (post-traumatic stress disorder) as a result of experiences with his other companies and he clearly sees the problem with the advertising model.
• Rants, yes. Money, maybe not. Again, public perceptions of social media in general and Twitter in particular are an issue. Mercator’s Hirschfield says many people will balk at putting their money in a place they think of as a place for sports scores and political posturing. Venmo, as a point of sale and P2P payment service, has a social media facet to it, which people can opt out of. Not everyone wants to share what they’ve just bought with their social connections.
“We’re still fairly reticent to share information about our finances,” says Hirschfield.
Mikula says that “Twitter has not had a great reputation from the viewpoint of data security.” For his part, in the more recent conversation with Twitter staff, Musk spoke of the importance of security at Tesla, SpaceX and Starlink.
“I’m not not familiar with security and privacy,” said Musk. “This is not my first rodeo on the privacy front. Like my sixth rodeo.”
Alternate Scenarios for Twitter’s Entry to Payments and Banking
Much is not known yet about Musk’s blueprint — if it is even solidified yet. Among the possibilities:
• A circular Twitter economy: Essentially, everything monetary would remain within the Twitterverse, almost as a form of digital scrip. P2P and other payment functions would remain in the ecosystem. This is not seen as terribly interesting, even to creators, because much of what people value is outside the system.
This potential approach differs from other systems where money may stay in the system for some time but which has utility outside of it. Many people leave balances in Venmo to facilitate payments on the app, for example. Mikula points out that this is for the sake of convenience. Likewise, specialized apps like Starbucks’ are closer to a dedicated gift card and can be “withdrawn” as beverages or snacks whenever desired.
Similarly, while Apple has been building on its “walled garden” concept, that works for Apple because it is into so many different types of merchandise and services, various payment products can be used in the world outside the garden, and it has relationships with billions of people.
“I think Musk wants Twitter to be as economically important as Apple,” says Johnson, “but I don’t think Twitter has the same hold on people as Apple does.”
• “Twitter Payments as a Service:” In this scenario, Twitter’s payment functionality could be used at participating outside sellers as well as a P2P channel. Ecommerce developers would be able to build the Twitter payment connection into the sites and services they design for other companies. One option experts discuss is turning the Twitter handle, the “@name” identity, into a sort of token that would hold financial information securely.
This could be a “go big” strategy. “I’ve learned not to underestimate Elon Musk’s ambitions,” says Johnson.
• Twitter using BaaS: A fast way into payments and banking would be akin to neobanks’ use of banking as a service. However, there’s some doubt on that score because experts think that the volume of activity necessary to make the impact Musk likely wants would dwarf the capabilities of many BaaS providers. But some suggest that a third party could network multiple BaaS providers in some way to serve Twitter’s needs centrally. Such “middleware” firms are already expanding their role in BaaS.
Plagiarize to Survive? Using Twitter Payments in an Entirely New Way
Crone, the payments consultant, suggests a completely different scenario and has a great deal of optimism for Musk’s ability to pull it off.
He sees Twitter stepping into Venmo’s space from the other side of the playing field. Venmo is a payment method that has a social angle. Twitter is a social media platform that wants to be a payment stream. Crone calls this a “plagiarize to survive” strategy. But the Venmo-esque angle is only part of it. (And Venmo only does business in the U.S. currently.)
Given that Twitter is already a social media engine, he sees the possibility of also including the ability to organize group purchases of items or services, using the bulk order as a money-saving tool .
This would be an adaptation of Pinduoduo, a Chinese firm that began as an agricultural seller but evolved into a means of consumers forming ad hoc purchasing groups. Crone thinks this may be what Musk has in mind, bringing Twitter’s social element together with a new payment element. This is akin to a self-organized Groupon-like idea, but via Twitter, it could be on steroids.
“Pinduoduo is extreme couponing,” says Crone. And he notes that this potential strategy plays into an economy where many are already seeking to stretch their dollars.
Combining this and Venmo-like functionality into the same commercial effort would add an element of product promotion for merchants. An increasing part of the business of the dedicated buy now, pay later companies is serving as a marketing mechanism, turning websites and apps into shopping tools and social media advertising. Crone sees this increasing the value of Twitter’s audience of regular users exponentially. (The technical term for those people is “MADU” — monetizable average daily users.)
This would at once metamorphosize and reboot Twitter’s advertising model, Crone says.
“Elon Musk is not a charity. He’s a businessman and he bought Twitter to make a big gain.”
— Richard Crone, payments consultant
If such an effort caught fire, Crone suggests, someday Musk could take on Apple in its financial product pursuits.
Farfetched? Twenty years ago, who thought a “computer company” would have a credit card?
For Twitter, says Crone, “this is a greenfield opportunity.”