Visa Inc (V), Mastercard Inc (MA): Prep Your Portfolio for a Cashless Society

The “leap frog” effect
Visa and MasterCard are also ingraining themselves into developing markets. Matthew Driver, MasterCard’s Southeast Asia head, summed the strategy up by stating, “In markets where you don’t have that fixed infrastructure in place, it may well be that mobile acceptance is going to be the way to go… There’s a great opportunity to leapfrog.” 

Both electronic payments companies are looking to get in early on these “leap-frog” markets, which never really had fixed infrastructure installed and are leaping right into wireless technology. In Myanmar, for instance, as well as other “frontier markets,” people are more likely to get a feature phone or even a smartphone, before a bank account. That’s why mobile payments make sense for the future of these countries, which currently rely mostly on cash.

Visa and Mastercard Inc (NYSE:MA) also want to issue debit and prepaid cards in developing nations like Myanmar. MasterCard was the first payment network to issue a license to a Myanmar bank in September 2012. The number of ATMs in the country with access to Visa’s transaction network may double to 300 this year, according to Bloomberg. Fewer global cash transactions is the goal.

The bottom line
The two largest electronic payments companies both have great growth prospects going forward, but Visa currently looks like the best bet to capitalize from m-commerce and the cashless trend. It’s P/E ratio of about 22.5 makes it slightly cheaper than MasterCard, which trades at around 27.5 times earnings. Visa Inc (NYSE:V) is also bigger and has a head start on mobile payments thanks to its partnership with Samsung. Plus, Visa was just added to the Dow, giving it that official blue-chip designation. Now is a good time to grab some shares for your portfolio.

The article Prep Your Portfolio for a Cashless Society originally appeared on Fool.com and is written by Joseph Harry.

Joseph Harry owns shares of Visa. The Motley Fool recommends MasterCard and Visa. The Motley Fool owns shares of MasterCard and Visa.

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