What happened
The fintech sector was rocked on Wednesday by the news that Twitter has filed the initial regulatory paperwork required for its platform to handle payments.
Largely as a result, two of the sector's biggest names took hits to their share prices on the day. PayPal (PYPL 1.41%) -- coincidentally the result of an early business venture by current Twitter owner Elon Musk -- declined by 3%, while SoFi Technologies (SOFI 1.97%) dipped by more than 2%.
So what
Twitter is a massively popular micromessaging site, but popularity and ubiquity don't necessarily mean financial success. The company has struggled to grow, and it has very frequently lost money on the bottom line. As a result, during its life as a publicly traded company, it was never a particularly choice stock in the tech sector.
That's why Musk is scrambling to open new sources of revenue for Twitter, and so far, it seems like he's taking the shotgun approach. His big idea is to charge for verified accounts, although he trimmed that ambition after encountering resistance to a proposed $19.99 per share monthly fee (current introductory price: $7.99). Payment processing seems like one of what's likely to be a number of other brainstorms.
It's easy to dismiss Musk as being a flaky entrepreneur who got in over his head with Twitter. We shouldn't necessarily dismiss the company's apparent fintech ambitions, though. Even with Musk's early stumbles, the service remains wildly popular and has a massive user base; it's easy to imagine more than a few of these users availing themselves of a payment system readily available through the platform.
Now what
I don't think PayPal and SoFi investors should be too nervous about this -- at least, not yet. It is far too early to tell whether Musk/Twitter will even follow through with a move into fintech at all; it's very possible they won't do so to any substantial degree. Yet it's certainly worth keeping an eye on how this develops -- remember how many wags dismissed Tesla in its early days?
