Visa Partners With Vodafone To Offer Mobile Payment Service

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Visa (NYSE:V) has partnered with Vodafone to offer consumers the ability to pay for goods and services using their mobile phones instead of cash and cards. The two companies will work together to develop a Vodafone-branded proposition offered to consumers across Vodafone’s 398-million customer base in more than 30 countries across five continents. [1] Visa is the world’s largest payments network and competes with MasterCard (NYSE:MA), Discover Financial (NYSE:DFS) and Capital One (NYSE:COF).

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Mobile payments technology is still in its nascent stage but is seeing rapid growth. Already 80% of the mobile phone users in the U.S. have access to mobile web, and they are getting accustomed to making financial transactions on mobile devices. Consumers are buying music, apps, movies and books on mobile devices today. According to Park Associates, mobile payments solutions processed over $100 million in transactions in 2011 and is estimated to grow into the hundreds of billions by 2015. [2]

Mobile payments require a software application called “mobile wallet” that sits on consumers’ mobile phone and stores information about user accounts, coupons and loyalty programs. Consumers can access their mobile wallet application to purchase goods and pay for services at retail stores and online.

This partnership will provide Visa access to Vodafone’s large customer base, and Vodafone will receive the processing power and be associated with the Visa brand. We expect to see more such partnerships between payments networks and mobile service providers in coming years.

We have a price estimate of $90.05 on Visa’s stock, about 25% below its current market price.

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Notes:
  1. Vodafone and Visa Announce World’s Largest Mobile Payments Partnership, Feb 27, 2012, Press Release []
  2. Mobile payMent—Stepping into Uncharted Territory, Park Associates []