Deutsche Bank Discusses Payment Services

Deutsche Bank is out with a research report on payment services, including Mastercard MA and Visa V. It has Buy ratings on both of them. It has a $330 price target on Mastercard and a $105 price target on Visa. In a note to clients, Deutsche Bank writes, "We provide some thoughts on how the banks may be poised to act as the focus on Debit begins to shift to AD (After Durbin), and we also explore the nuances we have recently picked up between the MasterCard and Visa strategies as they relate to penetrating an important emerging payment market like India, and addressing the consensus favorite payment topic in general in Mobile." Deutsche Bank goes on to say, "V/MA philosophies around mobile are becoming clearer to us. As to economics, we think of mobile payments as additive to the traditional revs streams of payment networks, and so far V seems to us as more ambitious in going after those incremental fees. MA may be more willing to let Google explore those areas while it focuses on making the user experience mirror that of traditional payments (and earning its more familiar fees for doing so). As for Google Wallet, we are impressed by the large # (and everyday spend nature) of merchants signed on to participate initially. We understand FDC intends to aggressively drive terminalization of early adopters, but the parties may be dependent on a national upgrade cycle of NFC-compliant terminals to kick in before broader adoption can be achieved. Mobile outside the US ironically is discussed less but probably means more to near-term growth for both MA/V, so in terms of JV's it may be more meaningful to monitor Telefonica as opposed to Google for now." Shares of V and MA both finished sharply higher yesterday.