NEW YORK (TheStreet) -- The disabling of Apple's (AAPL) - Get Report Apple Pay by Rite Aid (RAD) - Get Report and CVS (CVS) - Get Report shows that competition in electronic payments is just beginning to heat up -- and that's good news for investors.
Both pharmacy chains took this action because they are connected with Merchant Customer Exchange, a consortium of merchants working on the development of its own payments system. This system is supposed to be introduced sometime in 2015.
This is good news in that competition is accelerating here and is drawing in more and bigger players.
Banking is changing. There are going to be some terrific opportunities to invest in companies creating the new systems in the next three to five years -- companies that will come to define banking in the future.
Right now a lot of the efforts are dealing with "unbundled" banking products like funds transfer or lending. Whether these will stay separate in the future or will be "re-bundled" in a new way is impossible to tell at this stage. Finding this out will be a part of the ride.
Bigger players and bigger pots of money are coming to the industry. The advice here is simple: follow the money!
For example, the new world of electronic banking can cite the presence of John Mack, former chief executive of Morgan Stanley (MS) - Get Report and Larry Summers, formerly U.S. Secretary of the Treasury and president of Harvard University. Both are members of the board at Lending Club, the largest peer-to-peer lender, which is soon to bring its own IPO to market.
The most recent addition to this field is Mohamed El-Erian, former chief executive of PIMCO and president and CEO of Harvard Management, the unit that manages Harvard's endowment. It was announced last week that Mr. El-Erian will be the lead investor in a new peer-to-peer lending group called Payoff.
Apple, the developer of Apple Pay, has its own group of retailers that it is working with and has been operational for about a week.
A lot is happening in the payments area. The announcement that Apple was going to introduce Apple Pay was widely believed to be the final push to get eBay (EBAY) - Get Report to spin off its payments subsidiary PayPal into a separate company so that it could focus and improve its product.
These are just some of the high profile names that are now pushing heavily to get into the area. At least 20 smaller companies in Philadelphia and the Mid-Atlantic region are working on some form of lending platform or payments platform.
That bigger names are getting more engaged in the game is just one more piece of evidence that over the next three to five years electronic banking is going to be a very hot area. There will be major changes coming to the banking industry.
That's the American way.
A similar situation occurred in the cell phone space. We didn't have a standardized platform that all producers of cell phones conformed to. There was the 2G system and the 3G system. People were concerned that the Europeans would come to dominate the field because they had to conform to a designated platform. This allowed Nokia (NOK) - Get Report , for example, to get out ahead of everyone else because it had a monopoly on the system it used and everyone else had to design their products to fit the model.
In America, however, it was very messy. With several systems competing to become the standard, we had incompatible networks. People were burdened with the problem that what they purchased might not be the winning platform.
Well, in the end the American system worked out pretty well and we have some pretty terrific smartphones.
And, where is Europe in the picture now?
The development of smart phones changed the communications world and provided investors opportunities to profit from its advances. It looks like the same thing is happening in financial products.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates CVS HEALTH CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CVS HEALTH CORP (CVS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins."
You can view the full analysis from the report here: CVS Ratings Report