More Americans are cutting up their credit cards, and it's for a reason you might not expect.
The rise of mobile applications and Near-Field Communications (NFC) technology continues to carve market share from plastic payment methods.
And now, the trend is going mainstream in one of the most trafficked businesses in America.
Starbucks Corp. (Nasdaq: SBUX) announced this week that it currently receives 11% of its U.S. and Canadian sales through its mobile application. And that figure is expected to rise as the company continues to market its convenient closed-loop payment system.
The company's President and Chief Executive Officer Howard Schultz couldn't have been more excited about the trend.
"Starbucks is a clear leader in mobile payments and we are encouraged by how consumers have embraced mobile apps as a way to pay," he said during an Oct. 30 conference call.
Of course, some analysts predict this is just another fad that will fade.
The technology answers "yes" to all six questions. Most important, the ability to expedite payments in a more convenient, less onerous manner is a major benefit to consumers of all stripes.
And this isn't just an American trend.
Earlier this month, the head of electronic channels at the Spanish bank La Caixa, Benjami Puigdevall Esteve, said that he thinks NFC technology is going to take Europe by storm in 2014.
And as this becomes a global phenomenon, there's still time to invest and capture your share of an industry poised to reach more $58 billion by 2017, according to eMarketer.
Five Stocks to Buy Now Before Mobile Payments Soar
As consumers continue to do even more with their mobile devices, expect retail companies to adopt new systems to accommodate this growing, profitable trend.
Here are five stocks to buy now that are poised to provide the biggest return as consumers continue to transition from cash and plastic to cell phone payment systems:
VeriFone (NYSE: PAY): VeriFone is a company without a lot of name recognition. But it's a critical behind-the-scenes service operator to some of the biggest financial institutions in America. Best known for the iPhone-based VeriFone application, the company recently partnered with Micros Systems to develop mobile payment technologies for restaurant consumers.
Vodafone Group Plc (Nasdaq: VOD): For investors looking to make a play in emerging markets, Vodafone and ICICI Bank launched M-Pesa - a mobile money transfer and payment service - for consumers in countries like India, Kenya, Tanzania and even the Democratic Republic of Congo. And the technology is revolutionizing the way people are able to acquire funds. Using just a text message, people can transfer and receive small amounts of money through their phones. This is a game changer in these countries, as people had no choice but to use cash at all times to pay for food, public transport, and basic goods. Customers are also delighted because it will reduce crime with fewer people forced to carry cash. The service is now being rolled out to more than 220 million people in India, with a target of covering the entire country within the next few years.
eBay Inc (Nasdaq: EBAY) is the owner of Paypal, an original leader in online payments and mobile platforms. In October 2010, Paypal lauched its Titanium+Conference mobile payment program, which allows small businesses to design custom payment systems for smartphones. It is estimated that nearly 100 million active accounts already exist.
Visa (NYSE: V): Credit card companies aren't going to take the transition from plastic to tech lightly. Companies like Visa and American Express are pushing capital into new mobile payment start-ups. Visa announced in May that it is creating its own digital wallet platform to enable "One Click" purchases online (Similar to Amazon) and at checkout counters with their mobile devices. The company also pumped $27.5 million into Square Wallet, a tech company that eliminates the need for cash registers and replaces them with a swiping device similar to a Fob. Square is widely used at Starbucks.
Amazon.com Inc (Nasdaq: AMZN): If there is money to be made on distribution of capital and the processing of goods and services, you can be sure that Amazon's name will pop up. The company targeted its rival Paypal in 2006 with its propritary Amazon Payments. Unfortunately for Amazon (which has done everything else right in recent years), the service has underperformed. Expect Amazon to hit a home run with its next attempt.
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Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.