Zacks_Analysts' Blog : Fidelity Launches Mobile Wallet - Analyst Blog

Fidelity National Information Services Inc. (FIS) recently collaborated with mobile payments technology provider, Paydiant, to launch a cloud-based mobile payment solution, namely FIS Mobile Wallet.  The solution, which is currently being implemented by a number of clients on a pilot basis, allows customers to use smartphones to make purchases at the point-of-sale (POS) as well as for online shopping.

The cloud-based payment solution is readily accessible through most smartphones and can be easily integrated into retailers’ and financial institutions’ existing mobile applications. Smartphone users are only required to download an application from their financial institution or retailer, attach their payment card information and then use the soluti­on to make purchases.

FIS Mobile Wallet uses quick response barcode (QR code) technology to execute transactions. The technology uses smartphones’s camera as a scanner to read two-dimensional bar codes, storing the payment information for direct billing through the carrier.

The QR technology has gained popularity among both retailers and financial institutions as compared to near-field communication (NFC) technology. NFC has been much criticized due to higher cost of installing the chips in phones and the cost of upgrading merchants' terminals to accept contact-less transactions.

However, the unique feature of FIS Mobile Wallet is that no payment credentials such as Pin numbers are needed to be stored on the smartphone or shared with the POS device at any point of the transaction. This makes the whole transaction process secure and more customer friendly.

According to a recent consumer survey conducted jointly by Javelin Strategy & Research and PaymentOne Corp, the majority of respondents are apprehensive about using their credit cards for online transactions mainly due to privacy and security concerns. However, respondents believe that direct carrier-billed mobile payments are more secure than using credit and debit cards for online digital purchases.

We believe that this shift in consumer behavior bodes well for mobile payments services providers such as Fidelity. Most recently, Fidelity made a strategic investment in mobile banking and payments services provider mFoundry, reflecting its continued focus on this fast growing market.

As more and more financial and banking institutions look to differentiate their services by providing mobile banking, we believe that increasing investment on this technology will boost Fidelity’s client base going forward.

However, we note that Fidelity is a late entrant in the mobile payment market, which is already crowded with big banks and telecom providers with their own products such as ClearXchange, Google’s (GOOG) Wallet, ISIS, Visa (V) and PayPal, thus making it difficult for the company to achieve significant growth in the near term.

We maintain our Neutral recommendation on a long-term basis (for the next 6 to 12 months). Currently, Fidelity has a Zacks #3 Rank, which implies a short-term Hold rating (for the next 1-3 months).