Back to top

Analyst Blog

Although share prices remained almost constant for Visa Inc. and MasterCard Incorporated , no one can deny the importance of the major news at present in the payment processing space– the collaboration of these two industry bigwigs. In the realm of data breaches, both the entities through their collaboration are resorting to enhanced technologies to improve card payment security.

There have been quite a number of data breaches in the recent times that have affected millions of people. Recalling 2012, almost every industry, be it banking or insurance or government departments and not to forget the security companies (that is an irony as they aim to protect against such attacks) have fallen victim to hacking or data breaching.

The credit card industry has also faced such scams. How can anyone forget about the breach at another industry leading payment processor, Global Payments Inc. last year that raised consumer concerns about identity theft? As per a Wall Street Journal report, although Global Payments declined to disclose the type of data that had been accessed or even the number of cards that were at risk, investigators anticipated that the number could be hundreds of thousands. The most high-profile case in this regard was the card data theft at Target Corp. where almost 40 million debit and credit card records were stolen.

Such frauds have impelled Visa and MasterCard to collectively address the issue and come up with a solution that would enhance payment security and conform to customer expectations.  Thus, to counter such scams, Visa and MasterCard are forming a new cross-industry group that would emphasize on the EMV chip technology adoption in the U.S. and concentrate on tokenization, point-to-point encryption and other online and mobile channel security-related requirements. The group will comprise banks, credit unions, acquirers, retailers, point-of-sale device manufacturers and industry trade groups.

Management of Visa is of the opinion that it is not in the hands of a single industry to solve payment system frauds, particularly, in the face of an increased shift towards the plastic mode of payment. The formation of this cross-industry group by Visa and MasterCard serves as a platform in this regard where multiple industries and technologies can come forward to share ideas and encourage the use of advanced technologies for combating payment frauds and generate superior security solutions.

As per Reuters, MasterCard and Visa have set Oct 2015 as the deadline for U.S. retailers to adopt the new payment technology. Earlier, the U.S retailers’ customers were lacking the protection that is enjoyed by consumers across 80 countries who have a chip and PIN securing their credit and debit cards. With the aforementioned deal, MasterCard and Visa aims to bring in this protection to the U.S. card users. Being one of the pioneers in introducing these security solutions in the U.S., both the companies are expected to secure confidence of its existing customers as well as those who were skeptical regarding card security. This in turn should help both Visa and MasterCard to generate higher volumes thereby boosting sales.

Visa and MasterCard both carry a Zacks Rank #3 (Hold). However, Global Payments, with a Zacks Rank #2 (Buy), is a better-ranked stock in the same sector.
 

Please login to Zacks.com or register to post a comment.