Expected Apple (AAPL) Payment Offering an Incremental Positive for Visa (V), MasterCard (MA) - Morgan Stanley

Morgan Stanley analyst Smittipon Srethapramote said Apple's (Nasdaq: AAPL) payment offering will be an incremental positive for the networks MasterCard, Inc. (NYSE: MA) and Visa (NYSE: V).

"... increased adoption of mobile wallets by consumers and merchants should accelerate the shift from cash transactions to electronic transactions, which should benefit the networks as more transactions will take place over the networks’ rails," the analyst said.

Based on initial reports, the analyst sees minimal risk that Apple will allow consumers to fund their mobile wallet through ACH.

The analyst also said increased usage of mobile wallets will generate new tokenization revenue streams for V/MA. "MA has confirmed that they will be implementing new issuers fees related to tokenization of card accounts. The new fees will include a $0.50 digitization fee, which will be collected from issuers for each instance that a mobile device is provisioned with a tokenized payment credential. MA will also charge issuers a $0.10 monthly fee per digitized/tokenized account per device. V has not made announcements about tokenization related fees thus far, but we would be surprised if they do not eventually introduce some form of service fee also."

Potential downside risk for Visa and Mastercard would come if Apple decides to embrace a similar model to PayPal and play the role of the merchant of record, the analyst said.

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