By Neal Rau
The market for mobile payment transactions is predicted to rise 44% this year to over $235 billion, which includes merchant purchases, money transfers and bill payments. PayPal, owned by eBay Inc. (EBAY), is the best known mobile online payment option. PayPal is extremely important to eBay, as it accounted for about 40% of eBay's 2012 revenue. PayPal hasn't had much competition but recently big names have been surfacing as potential competitors. How much would eBay's stock be affected if a big competitor stepped in?
Security is the biggest concern for consumers who want to use digital wallet providers, which might be why PayPal has been successful in fending off some smaller challengers up to this point. Only about 12% of consumers surveyed say they have used a digital wallet service other than PayPal. However, with the explosion of mobile merchant transactions, bigger players are starting to surface and eBay shareholders should take notice. Stock Traders Daily has EBAY neutral long-term, thus far the stock has held support through a tight trading range over the last six months.
Facebook Inc. (FB) confirmed that it was preparing to test a mobile payment service that allows purchases to be made with just a Facebook login. The company has millions of gamers who spend money buying in-game virtual goods while playing on top of the Facebook platform. While the company has been clear to say they are not looking to replace PayPal , with this test run it isn't a stretch to think they might at some point in the future.
Apple Inc. (AAPL), who is rumored to be starting a mobile payment service called iWallet, might be an even bigger threat to PayPal. The key factor is Apple's iTunes, which the company said has more than a half-billion active iTunes accounts linked to credit cards. Another advantage is its existing partnerships with some of the biggest retailers like Wal-Mart (WMT), Target (TGT) and Best Buy (BBY). Apple could leverage those relationships to help its own iWallet service get started. Apple has been working on iWallet for the past two and a half years and a fingerprint technology to go along with it. Apple bought fingerprint and secure solutions specialist Authentec last year for $356million.The next generation iPhone is expected to be released next month, and is rumored to include a fingerprint sensor and a near-field communications chip for mobile payments.
Google Inc.'s (GOOG) product, Google Wallet, makes sense for the company because it can add purchase behavior to its already massive stockpile of data. Despite some major advantages, like Android, the company has yet been successful in making Google Wallet a household name yet.
PayPal might finally see some real competition in the mobile payment service business, as bigger names like Apple and Facebook move in. Any business lost from PayPal would certainly be bad for eBay's stock. Shares of eBay have been in a tight trading range over the last six months, so right now there is no immediate concern, but if support breaks all that would change. At Stock Traders Daily the discipline is to sell/short if support levels break or resistance levels are tested, but neither has happened yet, so according to our observations EBAY should be monitored for opportunity, defined catalysts exist, but no actionable triggers are occurring for longer term trades in EBAY quite yet. Patience!