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To expand its payment operations, Visa Inc. (V - Analyst Report) joined hands with three leading mobile point-of-sale (:mPOS) providers viz. iZettle, SumUp and Swiff. The deal is aimed at deploying secure mobile acceptance terminals across various locations to realize the transition of payments from paper to electronic mode. Furthermore the company approved Anywhere Commerce and Miura Systems to process Visa payments.

This alliance will allow merchants to accept Visa payments through mobile technology. As per the deal, to get their mobile hardware and software verified, iZettle, SumUp and Swiff will participate in the Visa Ready Program. The Visa Ready Program aims at merging Visa with the mPOS providers to offer merchants and consumers with a convenient yet safe payment option.

The deal will allow iZettle, SumUp and Swiff to access Visa’s best practices, APIs (Application Program Interfaces) and SDKs (Software Design Kits). These would include tools, direct connection to Visa, value-added services and Visa Ready symbol.

As per the agreement the mPOS providers can access reference applications and tools to facilitate the ongoing development of magnetic stripe, EMV-chip (contact and contactless), and mobile acceptance solutions. To simplify the processing of the EMV-chip transactions, they will be connected to Visa in some countries with the help of Visa POS Solutions platform or payment gateways like CyberSource and Authorize.Net.

In addition, the companies might also be exposed to Visa’s value-added services, like instant redemption of special offers at the point-of sale. Additionally, on approval by Visa, iZettle, SumUp and Swiff will be permitted to use the Visa Ready symbol to endorse their devices. Anywhere Commerce and Miura Systems are already permitted to use the symbol to market their Visa approved devices.

Mobile acceptance technology is judged best for the electronic mode of payment to all types of merchants, consumers and financial institutions. Through the use of mPOS technology, merchants who were out of the purview of accepting card payments will now be exposed to the electronic payment market. It will also benefit consumers through the convenience of mobile checkout.

Micro and small merchants have responded to this mPOS acceptance solution vastly in recent years, which has helped the transition of payments to electronic mode. This is evident from the burgeoning usage of the number of mPOS terminals from 2011 to 2012. mPOS terminals increased 111% year over year to 9.5 million in 2012 and is anticipated to reach as high as 38 million by 2017.

Despite growing acceptance of mPOS payment mode, nearly 19 million or 70% of the total number of merchants in the United States are yet to accept the electronic payment methods. When transactions at these merchants are summed up it would translate to a potential yearly migration of more than $1.1 trillion from paper to electronic mode. So, this provides a huge scope for Visa to tap the prospective clients to enhance its business.

In the fiscal second quarter 2013, Visa’s revenues increased 14.7% year over year to approximately $3 billion. We expect the deal to help the company attain its goal of strengthening the customer base and thereby bolster revenues further.

Visa currently carries a Zacks Rank #2 (Buy). Among other stocks Vantiv Inc. (VNTV - Snapshot Report) carries a favorable Zacks Rank #1 (Strong Buy) while Fidelity National Information Services Inc. (FIS - Analyst Report) and Official Payments Holdings Ltd. share the same Zacks Rank as Visa.

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