Are You Ready For a Sizzling M-Commerce Player?

Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Technology has made life unpredictable and dynamic. Every time you get used to some new technology, innovation takes place and makes the older technology obsolete. This changing technology has played a key role in the payment industry. Gone are the days when cash payments were made for each purchase. Hence, there was an emergence of electronic payment providers which made online shopping popular and easy.

However, industry players such as VeriFone Systems (NYSE: PAY), NCR Corporation (NYSE: NCR) and eBay (NASDAQ: EBAY) are not satisfied with this dynamic shift. They want more. This is paving way for the growth of mobile commerce, which will make payment even more interesting as it moves into the world of smart phones. It enables people to make payment through their phones or tablets by connecting a card reader that can swipe a customer's credit card.

Emerging Ideas

The idea was initiated by private industry player Square, which entered into a deal with Starbucks for mobile payment. Through this deal, customers at Starbucks’ stores will be able to pay for their lattes through their mobile phones. This led VeriFone to launch a new mobile payment processing system for small and medium sized businesses, called SAIL.

Though VeriFone’s new payment processing system is very similar to what Square has been offering, it will have some added advantages. It offers customer loyalty programs and uses social media to have a better foothold within a market. The application helps develop a long relationship with the customer by providing loyalty discounts to the regulars.

Even eBay launched a mobile payment system called PayPal Here, which is also aimed at small businesses. The new payment system is available in Home Depot’s stores. It makes it very easy to pay at the stores by just calling out a pin code and the customer’s mobile phone number to the cashier.

On the other hand, NCR Corporation has not been very active on this front. This lack of drive into mobile payment systems is probably the reason why NCR is lagging behind its competitors when it comes to revenue growth in the last 5 years.

<img src="http://media.ycharts.com/charts/73fbb2b4c74742cc9152c6cb2bf580e4.png" />

PAY Revenue Annual YoY Growth data by YCharts

VeriFone Systems has had the highest appreciation (30%) in its revenue in the last 5 years, way above its industry peers. This is mainly because of its continuous efforts to outperform others. However, this has not been reflected in its stock price. Stock price performance of the mobile payment players in the last year is depicted in the chart below.

<img src="http://media.ycharts.com/charts/39caadd5cea470113fa546f69723b4f4.png" />

PAY data by YCharts

In spite of good revenue growth, the stock price of VeriFone has been falling, with a nearly 16% decline in the last year. Hence, this highlights the fact that the company’s share price is undervalued and has room to rise going forward. Moreover, it has great future prospect, another strong indicator of its potential.

Deals Galore

Verifone has been in the process of rolling out its method of payment in taxicabs through smart phones, striking a deal with Columbia’s Taxicab Commission to boost the product's exposure. The company has also entered into a partnership with National Australia Bank to provide credit card acceptance solutions for the bank’s business customers. Hence, the merchant customers of National Australia Bank will be able to use smart phones or tablets to accept payment from their customers.

Also, VeriFone will be installing its mobile payment systems in the checkout lanes of the retailer Finish Line. The electronic payment provider will be installing mobile card acceptance systems by November, which will make customers’ shopping experience even better.

The Final Verdict

VeriFone has a number of deals that will be beneficial to its future prospects, making it attractive going forward. With the emergence of mobile payments as a new way to pay, all of the industry players will have a chance to attract more customers. Among them, VeriFone has already been performing well and seems to be well positioned for a bright future, with a large number of customers lined up for its payment systems. Investors should take notice of this undervalued performer.


justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of VeriFone Holdings. Motley Fool newsletter services recommend eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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