NEW YORK (TheStreet) -- Mobile payments giant Square is unveiling a solution to meet new EMV standards in an effort to help sellers get ahead of the new credit card technology planned for next year, cutting down on credit card fraud as well.
An EMV solution (which stands for Europay, Mastercard (MA) - Get Mastercard Incorporated Class A Report, Visa (V) - Get Visa Inc. Class A Report,) will allow small businesses to accept new credit cards with chips inside them, making them harder to clone than the traditional magnetic-stripe credit cards. The solution will include a new Square chip reader and a resource for Square sellers on what the migration towards EMV means for their business.
The deadline for businesses to be able to accept the new credit cards is October 2015. If a business is not compliant by then and the chip card being used is fraudulent, then the merchant will be liable for the fraudulent charges.
"There are more and more ways to pay, and with options like bitcoin and contactless [payments], customers expect to pay however they want; cashiers should never have to say 'We don't accept that'," Square CEO Jack Dorsey said in a press release. "Square started by empowering anybody to accept credit cards and enabling customers to pay with their name. Our EMV readers are the next step towards ensuring sellers make every sale."
Square's EMV chip reader, which will be available later this year for pre-order, will look very similar to the company's existing card reader, and will work with Apple (AAPL) - Get Apple Inc. Report iPhones and iPads, as well as Google (GOOG) - Get Alphabet Inc. Class C Report Android devices.
Most EMV solutions cost hundreds of dollars. San Francisco-based Square did not announce pricing for its reader, but the original reader costs $10.
The move comes at a time when San Francisco-based Square, which has dealt with rumors of a sale to Google as well as Apple, is moving into other areas outside of payments to generate revenue. The company recently announced Square Order, a new way to pre-order food and drinks available for pickup, as well as other products, such as Square Cash and Square Register. According to sources close to the situation, Square still generates more than 90% of its annual revenue from payments processing.
As of May 2013, Square was handling an annualized $15 billion in payment transactions, though that number may approach $30 billion, according to a report from the Wall Street Journal. Based on a 2.75% flat fee, that would put Square's annual revenue at around $825 million. However, a good chunk of that, perhaps as much as 80%, goes to Visa, which owns a stake in Square, and MasterCard.
-- Written by Chris Ciaccia in New York
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TheStreet Ratings team rates VISA INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate VISA INC (V) 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, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 12.2%. Since the same quarter one year prior, revenues slightly increased by 5.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- V has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.
- VISA INC has improved earnings per share by 15.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, VISA INC increased its bottom line by earning $7.58 versus $3.13 in the prior year. This year, the market expects an improvement in earnings ($9.00 versus $7.58).
- The gross profit margin for VISA INC is rather high; currently it is at 67.48%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 43.10% significantly outperformed against the industry average.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: V Ratings Report