Because the $7.2 billion swipe fee settlement with Visa Inc (NYSE:V) and MasterCard Inc (NYSE:MA) doesn’t really settle the issue but merely delays it for eight months, Starbucks Corporation (NASDAQ:SBUX) stock may ultimately benefit from the alternative payment processing path it is blazing.
Nineteen major retailers, including Starbucks Corporation (NASDAQ:SBUX), Wal-Mart Stores, Inc. (NYSE:WMT), and Target Corporation (NYSE:TGT), along with the National Federation of Independent Business, are opting out of the settlement and are considering pursuing new litigation against the credit card processors and the big banks like Bank of America Corp (NYSE:BAC), which are the ultimate recipients of the fees charged.
They allege the settlement does little to change an unfair system that costs consumers about $50 billion annually. Considering Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) agreed to pay $6 billion to settle the lawsuit, plus delay imposing the fees again for eight months — a move that would cost them another $1.2 billion — it amounts to little more than chump change when they reimpose the fees.
Yet some retailers are exploring alternatives to credit and debit card payments that can mitigate the cost of using plastic. The Home Depot, Inc. (NYSE:HD), for example, is pioneering the use of PayPal to complete a transaction at the cash register. The swipe fee issue was one reason the eBay Inc (NASDAQ:EBAY) payment solution is now available when you walk up to checkout, and the service has signed up 23 national retailers thus far, including Abercrombie & Fitch Co. (NYSE:ANF), American Eagle Outfitters (NYSE:AEO), and J.C. Penney Company, Inc. (NYSE:JCP).
But the more interesting option to my thinking is the mobile wallet solution, where you can quickly use your smartphone to pay for a product or service. The industry is still in its infancy, but market researchers at Berg Insight think it will turn into a $35 billion industry by 2017, though that’s obviously still just a small portion of overall credit and debit card use. Still, it offers a path for retailers to follow.
Starbucks Corporation (NASDAQ:SBUX) is the trendsetter here with a stupid-simple smartphone app, so easy to use, in fact, that of the $500 million worth of goods and services purchased last year using mobile wallet apps, almost all of them were conducted in a Starbucks. That underscores the statements made earlier this year by CEO Howard Schultz, who said the coffee slinger was processing 3 million mobile payment transactions a week.