Mobile Payments: Plastic is so Passé

Mobile payments refer to payment services that are made through mobile devices. This may become the next disruptive technology, based on the growth in the number of mobile wallet apps globally and the adoption of mobile payment methods by large businesses like Starbucks Corporation (SBUX) which has been an early adopter of this technology.

Technology research firm Gartner, Inc. (IT) estimated that the total value of mobile payments exceeded $170 billion worldwide in 2012 and predicts that they will grow fourfold to more than $700 billion by 2017. Gartner has also estimated that the total users of mobile payments will more than double from an estimated 212 million in 2012 to almost 450 million in 2016. AXP.

Card Services Industry – Plastic Money Plays

The US card services industry comprises companies that process credit and debit card transactions on behalf of merchants and card issuing companies (such as banks). These companies also facilitate global fund transfers through their payment networks and merchants and financial insitutions pay them a fee for these services.

The industry is dominated by four major companies that process payments and offer value-added services to their clients. These companies’ primary source of revenues is the volume of total payments made through their networks. AXP.

Visa: License to Buy

Visa Inc. (V) is the world’s largest global payments company, with a proprietary network that interlinks banks, retail merchants and payment houses around the world. It is part of a unique league of financial services companies that do not issue cards or extend credit to customers, but instead offer payments products and services in partnership with banks and merchants to facilitate the transfer of money.

The company, headquartered in Foster City, California, was recently added as a component of the Dow Jones Industrial Index (Dow 30), along with the Goldman Sachs Group, Inc. (GS) and Nike, Inc. (NKE). With Visa’s purchase volumes making up a substantial chunk of total US retail sales, the company’s financial performance is a primary indicator of the level of consumer spending in the American economy. AXP.

Why Buying American Express Is A Good Idea

American Express (AXP) has several plans to boost its overall earnings. It entered a joint venture with Certares to transfer 50% ownership of its low profitable division -- Global Business Travel, or GBT. American Express's GBT division provides various services including travel solutions.

Integration of consulting services, and facilitating end to end meetings and event capabilities. GBT is an important division for American Express, with operations in 138 countries. GBT services are provided to corporate customers that have a travel spend estimate of more than $19 billion a year.

Last month, American Express reported that it will sell 50% of the division to an investor group led by Certares Bank. This group is expected to invest between $700 million and $1 billion to expand the division. After this investment. AXP.

American Express – Experience Some Express Growth

American Express Company (AXP), also known as AmEx, has traditionally been associated with wealth and big spenders. While it is classified as a diversified financial services company, it is considered part of the consumer finance sub-industry as its principal businesses involve charge and credit card payment products, and travel-related services to consumers and businesses worldwide.

The company has certain core advantages and growth drivers that differentiate it from other card companies. Whereas other card companies either issue cards or process transactions, American Express issues its own proprietary cards and processes online and merchant transactions on its own network.

We think AmEx is a solid play with potential to grow, based on the following data on its major sources of income. AXP.

Debit Cards Set To Take Over From Credit Cards

The first modern credit and charge cards were introduced in the 1950s, and that allowed consumers a cashless luxury to buy now and pay later. Since then, credit cards have also been a source of debate because of rumors and lawsuits centered on unethical and predatory practices by financial institutions. While the shift from cash based transactions to non-cash methods of payment has been a highly visible trend, there are more intricate trends in the global payments industry that are growing at a high rate.

Credit cards are being increasingly viewed with skepticism, mainly due to their high annual percentage rates (APRs) and often vague contract terms, many of which the average consumer fails to understand. It’s no wonder then that the average credit card debt for US households stands at $7,100 as of August 2013, down 1.08% from last year. It is also not surprising that after the 2008 financial crisis, as a result of tightening credit policies, the average number of credit cards held by Americans declined to 1.96, as of July 2013. The average number of cards held by Americans stood at 3.7 in 2009. Read more AXP.