Challenges encountered by X in its payment process.
In a move to expand its service offerings, Twitter, now known as X, has announced plans to launch a peer-to-peer (P2P) payments service this year. This venture, however, comes with a set of complex challenges that X must navigate to succeed in the competitive global payments landscape.
Cross-border P2P payments pose significant hurdles, including foreign exchange (FX) risks and costs, settlement delays, lack of real-time transparency, regulatory and compliance complexities, and limitations of existing financial infrastructure.
FX volatility and costs are substantial, with global cross-border transaction fees estimated at around US$120 billion annually[1][3]. X must manage these risks transparently and cost-effectively to attract users. Traditional cross-border payments often take 2 to 5 business days to settle due to time zone differences, bank holidays, and manual checks, which frustrate user experience[3]. To provide a truly seamless and instant payment service, X would need to overcome these delays.
Many cross-border payments lack transparency, exposing users to uncertainties and fraud risks[3]. X must build robust systems that offer users clear, real-time insights into their transactions. Navigating through a complex web of anti-money laundering (AML), know-your-customer (KYC), and counter-terrorist financing (CTF) regulations varying across jurisdictions also presents significant challenges[3]. Integrating compliant, scalable KYC/AML processes worldwide will be crucial for X.
Existing payment systems are often based on legacy infrastructure, limiting interoperability and operational efficiency[1][3]. X could innovate technologically, possibly integrating blockchain or tokenized bank liabilities to enable real-time, 24/7 interoperable settlements. The adoption of emerging technologies like tokenized liabilities and distributed ledgers requires universally accepted industry standards and cooperation among financial institutions[1]. Without such frameworks, X might struggle to scale its cross-border P2P offering securely and efficiently.
Depending on geographic focus, X could face regional issues such as foreign exchange liquidity constraints and regulatory fragmentation[4]. In the US, where PayPal, Venmo, Zelle, and Revolut dominate the P2P payments space and have aspirations to become superapps, the use of digital currencies in X's P2P payments remains risky due to evolving regulations.
X's P2P payments service, to be part of X Money, a digital wallet service connected to X accounts, could potentially innovate in the use of cryptocurrencies, a market not explored by WeChat and Alipay due to China's ban. X Money is also expected to enable tips for creators, another feature not commonly found in existing superapps.
Building trust with users through strong safeguarding and fraud prevention measures will continue to be crucial for X, especially given recent reports of user departures. X's partnership with Visa Direct for its P2P payments service provides cross-border capabilities in the 39 states where it operates, offering a competitive edge in the market.
In summary, for X to successfully incorporate cross-border P2P payments into its "everything app," it must address costly FX exposures, lengthy settlement times, opaque transaction processes, complex regulatory compliance, and the limitations of current financial infrastructure. Leveraging blockchain technology and participating in broader industry initiatives to standardize tokenized payments could help mitigate these challenges, but navigating the regulatory and operational complexities remains a significant undertaking[1][3].
To ensure its success in the competitive global payments landscape, X must effectively manage foreign exchange (FX) volatility and costs to attract users, as cross-border transaction fees amount to around $120 billion annually. Also, to provide users with a seamless and instant payment service, X needs to overcome time zone differences, bank holidays, and manual checks that lead to delays in traditional cross-border payments. In addition, building robust systems offering real-time transparency, integrating compliant, scalable KYC/AML processes worldwide, and potentially innovating with technologies like blockchain or tokenized bank liabilities will be crucial for X to navigate complex regulatory and compliance issues.
