Play It Safe : Big Credit Card Firm
- Risk level: 20
Imagine never having to carry cash or even a credit card. That's the future if mobile payments -- buying a hamburger or a new outfit with just a wave of your smartphone -- catch on. Telecommunications research firm Juniper Research estimates that the total value of mobile payments could reach $670 billion by 2015, about triple the amount from last year. Privacy and security concerns could keep mobile payments from becoming a way of life in the U.S. for a while, says Matthew Schuldt, who manages Fidelity's Select Computers Portfolio fund. At the least, investors have a reasonably safe way to buy into the trend: Visa (V) and MasterCard (MA) are developing their own mobile-payment systems, says Craig Richard, an equity analyst for the Buffalo Science and Technology fund. That could take years, but until then, both have all those credit and debit card transactions to drive higher sales and profits, says Richard.
Go for Broke: Small Tech Firm
- Risk level: 90
Venture capitalists are putting big money into small mobile-payment firms. But nearly all of those small fries are private, analysts say. For investors who don't have the million-dollar-plus entry fee for a venture capital fund, the only way to dive headfirst into the industry is VeriFone Systems (PAY) . Consumers might already have swiped their credit cards through a VeriFone device to make purchases at a gas station or retailer. Now many VeriFone devices and its software let people pay with just a swipe of their smartphone. The company gets a cut of each transaction (the firm won't say how much it makes off of each sale, but analysts say it's probably close to the 2.75 percent that Square, a start-up mobile-payment firm, collects). But VeriFone faces stiff competition from Square, from the PayPal division of eBay (EBAY) and from other rivals. Analysts say there's no guarantee that VeriFone's devices will become the industry standard.
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