Key Takeaways From The Electronic Payments Summit - Jefferies (V) (MA) (PYPL)

Jefferies analyst, Jason Kupferberg and team attended the Electronic Payments Summit and walked away with the following takeaways:

1) Visa (NYSE: V)/MasterCard (NYSE: MA) moat remains as safe as ever

2) PayPal (NASDAQ: PYPL) is still the clear leader online, with limited competitive threats

3) in-store mobile wallet penetration is still moving very slowly

4) technology changes favor private label (ADS/SYF)

5) EMV adoption has been a rocky road creating fresh tension between issuers and merchants

6) merchant acquiring tailwinds seem intact

V/MA investments in innovation should pay long-term dividends. Commentary regarding V/MA was universally positive, with speakers suggesting that the open-loop networks have positioned themselves very well over the long term, given their ongoing investments in areas such as tokenization and opening their APIs to third parties, which should enable them to remain very successful as the Internet of Things (IoT) gains traction and electronic payments become even more ubiquitous.

PYPL - no serious competitive threats in foreseeable future. Despite an increasingly crowded landscape of checkout buttons (Visa, MasterCard, Apple, Amazon, etc) our panelists were generally bullish on PYPL's ability to retain its substantial share, given their massive install base of 185M consumers and 13M merchants. This represents a competitive advantage, which is reinforced by new products such as One Touch and Venmo.

Tailwinds for merchant acquiring (GPN/VNTV/TSS) seem intact. The integrated channel seems to still have a few years of runway before reaching saturation, and many acquirers are likely to continue benefiting from technology changes such as EMV, mobile wallets, POS transformation, and ancillary offerings such as analytics, tokenization, backoffice software apps, and cash advances.

10% mobile wallet penetration of US in-store payments could be 5 years away. Across the value chain, panelists were consistent that they did not expect 2016 to be the year for significant adoption of in-store mobile wallet payments. When asked how long it might take for mobile wallets to achieve 10% share of US in-store payments, the average answer was about 5 years.

EMV deployment has been challenging for merchants; chargebacks causing friction with issuers. According to PAY, the long tail of US EMV adoption is likely to continue through 2019. Meanwhile, long certification queues and complex software deployments have complicated activation of EMV functionality for many large merchants.

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