Billionaire businessman Elon Musk outlined plans to offer banking and payments services on Twitter during a nearly hour-long Q&A session with the social media platform’s staff Thursday.

During the call, a recording of which was obtained by the Verge, Musk 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 business to become PayPal, detailed plans to “populate a balance for every verified Twitter user.” 

“Give them some amount of money, like ten bucks or something, that they can send anywhere in the system,” he said, according to a transcript posted by the Verge. “We need money transfer licenses for that, which we’ve applied for.”

Twitter on Friday filed paperwork with the Treasury Department to become a payments processor, according to the Financial Times. 

Musk talked about establishing a high-yield money market account “so that having a Twitter balance is the highest-yield thing that you can do.” 

“This is very complex and expensive. If you can simply have one balance on Twitter that can simply go positive or negative, and when it goes positive, the interest rate is better than what you could receive elsewhere, and when it goes negative, the interest rate is lower than what you see elsewhere, now you have a much simpler system,” he said.

During the call, a Twitter employee noted the services Musk outlined resembled that of a bank, and asked if Musk planned to offer loans on the platform.

“Well, if you want to provide a comprehensive service to people, then you can’t be missing key elements,” he replied.

Musk, who purchased the platform Oct. 27, has been vocal about his payments ambitions for the social media site. The SpaceX and Tesla CEO talked Thursday about the “transformative opportunity in payments,” and told employees he doesn’t see a huge difference between sending a direct message and sending a payment. 

“They are 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 tried to do payments before, said Daniela Hawkins, a managing principal at consulting firm Capco. “While those initiatives didn’t catch on with consumers, there’s still a tremendous amount of opportunity for companies to explore,” she said. 

Consumers in the U.S. still must log in to individual apps to use different payments rails, as with Venmo, Zelle and Cash App, Hawkins said. “It’s not the best banking experience,” she said.

But Musk’s vision to turn Twitter into a financial services platform will likely face an uphill battle because consumers, particularly in the U.S., don’t associate social media apps with payments, Hawkins said. Consumers, in general, are also growing more leery of social media apps because of misinformation on those platforms, she said.

“People are concerned about the number of bots constantly pushing misinformation,” she said. “That, in turn, would make it challenging for Twitter or any other social media platform to gain enough trust with consumers to transact payments on those apps.”

There are also the regulatory hurdles Twitter is likely to face as it aims to introduce bank-like products. For example, will the company partner with a bank or pursue its own charter to offer some of the products Musk teased?

“Money movement and banking are highly regulated,” Hawkins noted. “Elon Musk mentioned a high-yield savings account. That would suggest a bank partnership of some sort. But maybe Twitter pursues an industrial loan charter. Or a bank charter. There are still some questions about how this will come together.”

Industrial loan charters (ILCs), the charter of choice for some fintechs and nonbank corporations seeking to offer bank services, are not without controversy.  

Some lawmakers and bank trade groups have pushed back on attempts by corporations to obtain ILCs, arguing the structure exploits a regulatory loophole because ILC holding companies are not subject to the Bank Holding Company Act and the supervision of the Federal Reserve.

By Anna Hrushka on Nov 11, 2022
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