The Mobile Payments Market in 2013: eBay Inc (EBAY), Starbucks Corporation (SBUX) and More

What about the plastic?
For merchants, one key benefit to offering these alternative payment options is that they don’t incur unfair interchange fees like those imposed by the major credit card companies. With disruptors such as PayPal and Square gaining ground, many investors wonder how long the credit card companies can keep pace.

Mastercard Inc (NYSE:MA) and Visa Inc (NYSE:V) are quickly losing favor with U.S. retailers, who for years have been forced to pay them rising “swipe fees.” Worried by the growing threat of mobile payments, MasterCard and Visa launched a joint venture with mobile carriers known as ISIS. Similar to Google Inc (NASDAQ:GOOG)‘s Google Wallet platform, ISIS relies on near-field communication, or NFC, technology in smartphones.

However, payments via NFC have struggled to gain traction because consumers are required to have NFC-compatible handsets. For example, Apple Inc. (NASDAQ:AAPL) has yet to include NFC technology in any of its mobile devices — therefore excluding a significant portion of the market.

Cloud-based payments, on the other hand, such as those offered through PayPal and Square, are much more convenient for both consumers and retailers since they just require a free app installed on a user’s phone. Ultimately, the companies that will gain a foothold in the emerging mobile payments market are those that offer the most convenient solutions for the consumer.

For this reason, I believe PayPal is the safest bet for investors in the mobile payments space today. Together with parent company eBay, PayPal has built a brand that consumers know and trust. Shares of eBay are already up more than 12% year to date. However, I suspect the stock will climb higher from here, powered by new opportunities in its PayPal business.

The article The Mobile Payments Market in 2013 originally appeared on Fool.com and is written by Tamara Rutter.

Fool contributor Tamara Rutter owns shares of Apple. The Motley Fool recommends Apple, eBay, Google, Home Depot, Starbucks, and Visa. The Motley Fool owns shares of Apple, eBay, Google, MasterCard, and Starbucks.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.