How to Invest in the Death of Banking: Street Whispers

NEW YORK (TheStreet) -- Tougher regulations for banks mean less-regulated companies are likely to take market share from the hobbled industry.

Keefe Bruyette & Woods' analysts believe non-bank financial companies offer "some of the greatest opportunities in finance over the next five years," according to Fred Cannon, who oversees the investment bank's research department.

One area where KBW is particularly enthusiastic about growth prospects is mobile payments. What's more difficult is figuring out how to invest in the future of that business. Many of the most exciting companies dedicated to the space aren't publicly listed. The ones that are, on the other hand, are giants, and anything they're doing with mobile payments at this point barely makes a dent in overall revenues.

Still, when pressed, Cannon contends Visa (V) and MasterCard (MA) will be "very hard to avoid" for companies looking to capture mobile payments business.

"Payments is so huge you just have to get a little sliver of the pie and you'll do pretty well," he says.

By contrast, "it's going to be pretty easy to avoid your local bank branch five years from now," according to Cannon.

Other companies Cannon believes will almost certainly benefit from the move to mobile payments are Apple (AAPL) and eBay (EBAY), the latter through its PayPal unit.

Mortgage servicing is another area where banks such as Bank of America (BAC) have been pulling back sharply as new capital rules make the business prohibitively expensive for banks. One company moving to fill the void is Ocwen Financial (OCN), one of a handful of dedicated mortgage servicers quickly snapping up market share from banks.

Investors looking to capitalize on the tougher environment for banks will have to keep an eye on the Consumer Financial Protection Bureau. The new regulator is likely to be the toughest in Washington and non-bank financials look to be a big focus for the CFPB.

-- Written by Dan Freed in New York.

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