The future is embedded, and Twitter has laid out its vision for a payments system

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The financial services industry has experienced rapid growth due to the advent of emerging technology solutions and regulatory policies. Further accelerated by the global pandemic outbreak, digital payments have gained increasing traction among consumers, forcing businesses to innovate and delve into the world of financial services. The growing market for digital payments has also offered businesses an opportunity to drive incremental revenue per user. Notably, more and more players are responding to this opportunity. For instance,

• In November 2022, Elon Musk, the new owner of Twitter, announced his detailed vision to launch a payment solution on the social networking platform. In a live-streamed meeting with Twitter advertisers, Elon Musk suggested that Twitter will offer embedded payment services in the future, thereby enabling users to send and receive money on the platform. Furthermore, users will be able to withdraw their money to an authenticated bank account. To make the service more attractive for users, Elon Musk also proposed a high-yield money market account, thereby encouraging users to move their money to Twitter.

The announcement from Elon Musk, regarding the embedded payment offering, comes weeks after the social media platform filed registration paperwork, which will allow Twitter to process payments. However, the embedded payment offering is still some distance away, as the firm is initially focusing on making changes to its technology architecture, which is part of its strategy to support better video quality.

Notably, the firm is working on a Paywalled Video feature, which will allow creators to monetize their content on the platform. The launch of this feature means that Twitter will be competing directly with video-sharing social media platforms such as TikTok and Instagram. On the other hand, the proposed idea of offering a high-yield money savings account to its users will put Twitter in direct competition with Apple.

• In October 2022, Apple announced that the firm is planning to launch new savings account for its Apple Card users, thereby allowing them to set up and manage savings directly from their Apple Wallet. Notably, Apple partnered with Goldman Sachs to launch the savings account facility.

The challenge that Elon Musk is going to face with the launch of these services is that there is very little differentiation to offer. Like Apple, Twitter is also planning to have a high-yield savings account. Another challenge that Twitter might face is the fact that not many businesses have been able to drive incremental revenue through the launch of an embedded payments solution. Facebook is a prime example of this.

In China, WeChat has successfully implemented embedded payment services and has driven significant revenue through it. However, the monopoly created by WeChat in China has played a major role in the success of its embedded payment facility. But Twitter does not have any such leverage at its disposal. There is a lot of competition in the video-sharing and embedded payments space in the United States. Furthermore, the growing competition from neo-banks around the world, means the road to embedded finance is not going to be an easy one for Twitter and Elon Musk.

While the roadmap to drive profitability through embedded payment services is a difficult one for Twitter but building an ecosystem of services can help Elon Musk in offering more value to its users, thereby driving long-term loyalty and revenue for the firm. For instance,

• Once the creators start accumulating money through their followers, Twitter might prompt them to move their money to the platform. To encourage users to do this, Elon also suggested an incentive offering to get them started with the embedded payment services. Notably, the incentive offer can also be stretched to other users, to lure more users to move their money to Twitter. From the short to medium-term perspective, there is a greater possibility that Twitter might announce the launch of a few more services for its users. For instance, a streaming and ticket booking service, who knows, the opportunities are wide open for Twitter with Elon running the show.

Of course, it is still early to predict where Twitter wants to be over the next three to four years, and a lot of announcements made by Elon Musk might get completely abandoned over the next few quarters. However, the announcements from Elon Musk suggests that Twitter is seeking to combine payments, entertainment, and social network, all together, which is in line with his larger plan to turn the social media platform into an everything app, called X. While the future of payment is embedded and more players are expected to adopt a similar strategy over the next few years, the competitive landscape is expected to become even tougher for these firms to leverage on the growing shift to digital payments among consumers. 

To know more and gain a deeper understanding of the embedded finance industry in the United States, click here.