|PayPal's vision for the digital wallet|
Even though non-traditional payments companies are entering the space, firms like Visa ( V), and MasterCard ( MA) are not going to go down without a fight, perhaps part of the reason why Visa made an investment in mobile payment specialist Square last year. Channing Smith, portfolio manager of The Capital Advisors Growth Fund ( CIAOX) believes that Visa's infrastructure is not going to be dismantled or displaced by others, and that companies such as Apple and Google ( GOOG) will "increasingly rely on Visa and MasterCard's infrastructure as the mobile payments trend transitions to mass adoption." Smith is long both Visa and Apple.
What PayPal has done is combine payment sources (checking accounts, credit cards, coupons, gift cards) into one app, allowing users to pay for products in a variety of different ways. They can set payment terms or pay for the item(s) all at once, giving customers the flexibility to pay how they want, when they want. The merchant is paid via PayPal in full, and has access to the cash immediately. PayPal does not break out its fees to individual rates per merchant for in store payments, but notes "they will be on a par with what they are currently paying the traditional payment processors."
Passbook is a location-aware app that lets users store discount cards, gift cards, movie tickets and boarding passes. Users, for example, can store their Starbucks ( SBUX) gift cards, which some believe may transition Apple into the mobile payment space. Apple could not be reached for comment for this story. "This is Apple's first move towards the wallet," said Calvin Carter, President of Bottle Rocket Apps during a recent interview with TheStreet. "This is massive." Carter added that Passbook will prompt developers to start integrating the location-aware app into apps for large consumer brands. Credit Suisse research analysts James Kissane and Moshe Orenbuch believe that PassBook could prove a disruptive force the payments industry, especially with Apple's more than 400 million iTunes accounts, which store personal information. "The consensus seems to believe that Apple has the most potential to disrupt the payment system. It can alter the payments landscape in several ways," the analysts wrote in a recent research report. They believe that the next iPhone could help shape payments depending on whether it has NFC or a Cloud-based system, similar to what PayPal is doing. Credit Suisse rates Apple "outperform" with a $750 price target. Even though the mobile payment and digital wallet space has yet to find a consensus, one thing is clear, Smith wrote in his note. "...the payment itself is becoming commoditized; it is therefore the functionality you wrap around the payment or embed in the mobile wallet that will differentiate the winners from the losers." Interested in more on Apple? See TheStreet Ratings' report card for this stock. Check out our new tech blog, Tech Trends. Follow TheStreet Tech on your wireless devices. -- Written by Chris Ciaccia in New York >Contact by Email. Follow @Commodity_Bull