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Mobile Payments: 5 Stocks Changing How We Pay for Everything

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Four to five years ago, no one could have imagined shopping without a wallet in their pocket; having to move around without huge wads of bills to manage, no change falling out of your wallet, no loyalty cards crowding or old receipts weighing you down and most importantly no waiting in line.

However, what was once a far-fetched idea is now a reality. The payment landscape has evolved and diversified into various channels, from cash to checks to credit cards and debit cards and now to mobile payments.

Mobile Payment Systems

In today's fast paced, Internet-driven world, merchant services have evolved to the point where you don't even need a physical credit card to spend money. All you need is a smartphone and an app.

With over 6 billion mobile phone subscriptions worldwide and more than a billion smartphones in the market, the time is right for us to drop the physical wallet in favor of a digital one.

In a store, these devices can be enabled with near field communication (NFC), quick response (QR) code, Soundwave or Bluetooth low energy (BLE) technologies. An adequately equipped POS system is also necessary at retail outlets (in some cases) to accept payments using these technologies.

Apart from simplicity of usage, time savings and security (the card number details aren't shared) of such transactions, there is also the convenience of data storage (information related to multiple cards can be gathered under one umbrella by linking to a single user name).

The Scope

The mobile payments marketplace is set to explode. Statista reports that in 2011, the number of mobile payments made worldwide amounted to 7 billion and rose to 11.1 billion a year later. So forecasters expect this number to rise year on year and reach an expected 47 billion transactions in 2015.

IDC predicts that worldwide mobile payments will amount to $1 trillion in 2017, up 124% from less than $500 billion expected in 2015.

The Frontrunners

These predictions are encouraging for operators in the mobile payment space. It is bringing players from across a spectrum of industries, from big tech companies including Apple (Apple Pay), Google (Android Pay) and Samsung (Samsung Pay) to mobile operators and handset manufacturers into the mix.

Apple expects the Apple Pay app to be implemented at 1.5 million locations by the end of 2015. Android Pay, launched in May, is likely to be accepted by over 700,000 physical stores and over 1,000 mobile apps.

Facebook launched a payments feature for Messenger, allowing Facebook friends to send one another money through the app and a linked debit card. PayPal acquired Paydiant and Xoom, a sign of its aggressive moves. Even Microsoft is apparently gearing up to jump on the bandwagon. And when tech giants support a trend, it is most likely to gain momentum.

Then there is Starbucks whose smartphone app allows customers to place their orders and pay for beverages. Mobile transactions now constitute 20% of its in-store sales, more than double the mobile transaction sales numbers from two years ago.

Predicting the Trendsetters

With several key players offering a variety of mobile payments technologies and preparing to fight it out, we believe these five companies will be the trendsetters.

PayPal HoldingsPYPL was an early entrant in the mobile payments space. It spun off from eBay in July this year and thereafter started trading on the Nasdaq stock exchange.

One of the frequently associated glitch with PayPal being a subsidiary to eBay was the exclusive relationship PayPal had to observe with eBay Marketplaces. For example, PayPal was not allowed to work with Amazon.

Although such restrictions do not limit PayPal today, as we might see the company team up with Amazon in a proprietary deal anytime soon.

The company is about to close the acquisition of Xoom Corp., which will make it a dominant player in the mobile payments space.

The company is gaining in the fast growing digital payment space and to this effect has bought two companies: Venmo, a person-to-person money transfer and digital wallet service; and Braintree, a service that allows small merchants to accept Apple Pay, credit cards, and other money transfer services. Both services had doubled their transaction volumes in 2014.

Another favorable contract PayPal was able to haul was an Omnichannel deal with Macy's that deals with in-store, mobile and web-based purchases. Macy's win could signal that more deals like it are on its way.

As mobile payments pick up momentum in China, AlibabaBABA is aiming for gold with its financial arm Ant Financial's digital wallet Alipay. Established in 2004, Alipay, according to The Street, at present has more than 350 million registered users and 270 million monthly active users.

Fan Zhiming, VP of Ant Financial Services Group believes "Mobile payment is becoming more important, especially the younger generation, and they make up a great part of Alipay users. So it is important that we develop our mobile payment capabilities via Alipay Wallet."

"It's very important for Alibaba and Alipay that Alipay is successful in mobile payments," Wedbush analyst Gil Luria said. "The mobile wallet and digital wallet are important aspects of how payments are going to be done in the future and there's no reason why Alipay shouldn't lead the way."

Visa Inc.V operates the world's largest retail electronic payments network and is one of the most recognized global financial services brands. Visa facilitates global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities. Its industry leading position (with respect to total payments volume, total transactions and total number of cards in circulation); strategic partnerships for international expansion, strong expense control and margin expansion and above all growth in electronic payments make it a worthwhile choice.

MasterCard IncorporatedMA leads global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions and provides industry-leading analysis and consulting services to financial institution customers and merchants. It remains focused on growth with strategic acquisitions, strong international presence (nearly 70% of the company's revenue is generated by international regions such as Asia-Pacific, Canada, Europe, Latin America, Africa and Middle East) and strengthening of its position in the electronic payments space.

American Express CompanyAXP is primarily engaged in the business of providing travel related services, financial advisory services and international banking services throughout the world. Its well diversified business (its ongoing EGG program to focus diversifying its revenue mix in the areas of e-commerce, mobile payments and fee-based businesses in emerging markets through B2B initiatives), alliances, investment in digital commerce, acceleration of international business in many ways led by the OptBlue program and leading position in the card payment industry make it stand out.

To Conclude

The trend is setting in as customers are increasingly becoming comfortable with the idea of leaving their physical wallets at home. Retailers thus have to be on their toes now and plan mobile payment strategies that will revolutionize how people shop. Investors, on the other, hand, need to just invest in these future leaders of innovation, and then they can simply sit back and reap the benefits.

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MASTERCARD INC (MA): Free Stock Analysis Report

VISA INC-A (V): Free Stock Analysis Report

AMER EXPRESS CO (AXP): Free Stock Analysis Report

PAYPAL HOLDINGS (PYPL): Free Stock Analysis Report

ALIBABA GROUP (BABA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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