Elon Musk wants to make Twitter ‘the people’s financial institution’
Billionaire businessman Elon Musk outlined his plans to offer banking and payments services on Twitter during a nearly hour-long Q&A session with staff at the social media platform on Thursday.
During the call, a recording of which was obtained by the RodMusk shared his plans to allow Twitter users to maintain a cash balance on the platform, in a move that would turn the site into “the people’s financial institution”.
The entrepreneur, who co-founded online bank X.com in 1999 before it merged with another company to become PayPal, detailed his plans to “fill a balance for every verified Twitter user”.
“Give them a sum of money, like ten dollars or something, that they can send anywhere in the system,” he said, according to a transcript published by the Verge. “We need money transfer licenses for this, which we have applied for.”
Twitter on Friday filed documents with the Treasury Department to become a payments processor, according to the FinancialTimes.
Musk talked about creating a high-yield money market account “so that having a Twitter balance is the most profitable thing you can do.”
“It’s very complex and expensive. If you can just have a balance on Twitter that can just go positive or negative, and when it goes positive, the interest rate is better than what you might get elsewhere, and when it goes negative, the interest rate is interest is lower than what you see elsewhere, now you have a much simpler system,” he said.
During the call, a Twitter employee noted that the services Musk described resembled those of a bank and asked if Musk planned to offer loans on the platform.
“Well, if you want to provide a full service to people, you can’t miss key elements,” he replied.
Musk, which bought the platform October 27, talked about his financial services ambitions for social media site. The SpaceX and Tesla CEO spoke on Thursday about the “payments transformation opportunity” and told employees he didn’t see a huge difference between sending a direct message and sending a payment.
“They’re basically the same thing,” he said. “In principle, you can use a direct messaging stack for payments. And so that’s definitely a direction we’re going to go in, enabling people on Twitter to be able to send money anywhere in the world instantly and in real time. We just want to make it as useful as possible.
Twitter and other social media networks have already tried to make payments, said Daniela Hawkins, chief executive of consulting firm Capco.
“While these initiatives have not won over consumers, there are still huge opportunities for businesses to explore,” she said.
In the United States, consumers still need to log into individual apps to use different payment rails, such as with Venmo, Zelle and Cash App, Hawkins said.
“It’s not the best banking experience,” she says.
But Musk’s vision of turning Twitter into a financial services platform will likely face an uphill battle as consumers, especially in the United States, don’t associate social media apps with payments, Hawkins said.
Consumers, in general, are also increasingly wary of social media apps due to misinformation on these platforms, she said.
“People are concerned about the number of bots that are constantly pushing misinformation,” she said. “That, in turn, would make it difficult for Twitter or any other social media platform to gain enough trust with consumers to make payments on these apps.”
There are also the regulatory hurdles that Twitter is likely to face as it aims to introduce banking-like products. For example, wWill the company partner with a bank or pursue its own charter to offer some of the products Musk teased?
“Money movements and banking operations are highly regulated. Elon Musk mentioned a high yield savings account. That would suggest some sort of banking partnership,” Hawkins said. “But maybe Twitter is pursuing an industry lending charter. Or a bank charter. There are still questions about how this will materialize.
Industrial Lending Charters (ILCs), the charter of choice for several fintechs and non-banking companies seeking to offer banking services, are not without controversy.
Some lawmakers and banking trade groups have pushed back against the companies’ attempts to obtain ILCs, arguing that the structure exploits a regulatory loophole because ILC holding companies are not subject to the Bank Holding Company Act and Federal Reserve oversight. .