The Zacks Analyst Blog Highlights: IBM, Microsoft, Mastercard, Visa and American Express

For Immediate Release

Chicago, IL – April 10, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include IBM Corp. IBM, Microsoft MSFT, Mastercard Inc. MA, Visa Inc. V and American Express Inc. AXP.

Here are highlights from Monday’s Analyst Blog:

Blockchain Powering Innovation in Payments Industry

Blockchain is the new buzzword for innovation in the payments industry. Often taken as a synonym for bitcoin, players in the industry are aiming for the blockchain technology given its obvious benefits with regard to speed, accuracy, cost effectiveness, security and much more.

The terms blockchain and bitcoin are widely used interchangeably, but the misconception that blockchain is the technology  underlying the cryptocurrency, Bitcoin, is changing fast. Though there still remains ambiguity regarding the investment value of the digital currencies which have not yet received broad-based adoption and are often steered clear of, the technology underlying these digital currencies, the blockchain have received a thumbs up in the business world.

The Rise of Blockchain

As the name implies, blockchain is a chain of blocks building step by step. As each transaction takes place, it is put into a block, which is then connected to the previous block. The transactions are blocked together to form an irreversible chain.

The secured storage and transmission of data through a decentralized database is the most attractive feature of the blockchain technology. Originally used for cryptocurrency transactions, the system is transparent and incorruptible and meant to provide unaltered information.

Driven by multi-industrial adoption, the technology has rapidly gained traction over the last few years. The solutions offered by other key players in this domain like IBM Corp. and Microsoft have been adopted by the insurance, banking, food supply and automobile industries among others.

There is a huge amount of activity around blockchain technology, and payments is definitely one of the key spaces to watch.

Blockchain in Payments Industry

The attraction of the blockchain technology is hidden in the benefits it provides in three necessary areas of payments   —   speed, cost and security.

Highly Secured: One of the main purviews of a payments company is to provide highly secure payments service, and block chain perfectly fits the bill here. Data for transactions taking place via blockchain can be stored with all details such as the transaction amount, a guarantee of payment, confirmation of the payment and account profiles for the parties involved. Data theft on a blockchain becomes highly impossible because if data is changed on one node, every other node would have to reflect that change for it to take effect. Since blockchain uses a distributed consensus, tampering with its records without being noticed by an entire network is difficult. This makes the system extremely safe.

With minimum chances of double counting and hacking, the possibility of monetary losses is low via cybercrime. With increasing instances of cybercrime, which per a recent report by Cybersecurity Ventures is expected to cost global businesses over $6 trillion by 2021, this secured ledger-based technology is bound to gain further importance.

Cost Effective: Players are looking forward to blockchain for a solution to address high cost associated with the payments process under the present scenario, which involves costly, time-consuming, paper-based manual process. At present, fees have to be paid to various parties involved in payment processing and at times there are other fees at various other stages of the transaction. All these costs get elimination under blockchain since it nullifies the involvement of a third party in transaction processing, which pulls down overall costs.

Speed Enhancement: At present cross border payments are carried out through correspondent banks and not via a central clearing house, which lengthens the whole process, along with making it inefficient. Demand for speedier and efficient service makes blockchain technology the perfect fit here. On a blockchain-based payment, gateway payments can be sent anywhere around the world in 15 to 20 seconds by eliminating intermediaries and using algorithms to verify and authorize payments instantly. This can shorten the whole process which under traditional model takes up to three days, thereby reducing the overall wait time for transaction processing.

In Kenya, BitPesa is using the blockchain method to enable companies to make faster, cheaper payments between African countries without having to rely on slow and inefficient local banking infrastructure, according to a Citi Research report.

Adoption by Carriers

The blockchain technology is being adopted by industry players with arms wide open.

It was recently reported that Ripple, the U.S. digital payments company, is working with 61 Japanese banks to apply blockchain technology for efficient cash transfers.

Mastercard Inc. launched its own blockchain network last year to implement the technology in the business-to-business (B2B) space to address challenges of speed, transparency and costs in cross-border payments. The Mastercard blockchain technology will complement the company’s existing capabilities including virtual cards, Mastercard Send and Vocalink to support all types of cross-border, B2B payment flows – account-based, blockchain-based and card-based.

The company recently joined Enterprise Ethereum Alliance to explore the potential of the ethereum technology across a gamut of uses among which some are outside the scope of Mastercard’s traditional payments environment.  

Another major company Visa Inc. has recently launched Visa B2B Connect, a payment platform powered by the blockchain technology. Via this platform, Visa will offer its services using 23 fiat currencies and 4 partner banks including Commerce Bank in the US, Shinhan Bank in South Korea, Sberbank in Russia and United Overseas Bank in Singapore.

Last year, American Express Inc. inked a deal to use the blockchain technology to pay U.K. customers who bank with Santander. Recently, CoinDesk reported that the company has filed a patent related to blockchain. Reports noted that the company’s filing emphasized the potential for blockchain to enhance existing card networks.

Still a Long Way to Go

Given the fact that the technology is still in its nascent stages, there remains difficulty in understanding its functionality and applicability. It may thus take a few years before it becomes widely accepted. It is nonetheless a fact that blockchain is the forthcoming reality which would be transformational for the payments industry. We therefore expect to see increased activity on this front, going forward.

Among the companies mentioned (in the payments industry) above, Visa carries a Zacks Rank #2 (Buy) while Mastercard and American Express each sport a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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