How to invest in ISIS

The goal of ISIS is to provide wireless services to more than 200 million consumers. If the roll-out, which is taking place over the next year, gains traction, it could stand to pad the pockets of several companies.

Online mobile shopping could command as much as 12 percent of total global e-commerce by 2015, according to a report ABI Research. It’s a sign of just how comfortable consumers are getting using their phones to make purchases. The next logical step is to use mobile phones as payment mechanisms in stores, restaurants and small businesses – doing away with plastic once and for all.

The transition from credit cards to phone swiping could completely change the way with interact with businesses. No longer would we use a simple plastic card with a magnetic strip on the back, we’d be paying with a computer that could track purchases, offer discounts, tick off rewards points and offer incentives to come back.

ISIS is leading the charge into the pay-by-phone marketplace through a partnership with AT&T, Inc. (NYSE:ATT), Verizon Communications Inc. (NYSE:VZ) and T-Mobile USA. The national mobile commerce network will use near-field communication (NFC) technology to allow phones to wirelessly communicate with checkout terminals.

The goal of ISIS is to provide wireless services to more than 200 million consumers. If the roll-out, which is taking place over the next year, gains traction, it could stand to pad the pockets of several companies. Here are some tickers to consider if you’d like to invest in ISIS and NFC:

Discover Financial Services (NYSE:DFS). Payments made through the ISIS network will be processed by Discover. The Discover network is currently accepted at more than seven million merchant locations nationwide. DFS will, no doubt, get a percentage of all the sales the company processes.

Barclays, PLC (NYSE:BCS) Barclaycard US is expected to be the first issuer on the ISIS network thanks to the company’s experience processing NFC payments using standard credit cards. Eventually the ISIS network will be expanded to other banks.

While it’s unclear exactly how AT&T, Verizon and T-Mobile will profit off ISIS, I suspect they’ll also receive a cut of the payments processed over the network. They’ll likely ramp up efforts to partner with retailers to offer expanded services, too – things like rewards points, customer tracking and coupons.

It’s important to remember, though, that ISIS is just one of the many networks and companies working to dominate the pay-by-phone market. Visa, Inc. (NYSE:V), MasterCard, Inc. (NYSE:MA), eBay Inc.’s PayPal (NASDAQ:EBAY), Google Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) are just a few of the heavyweights with skin in the game. It’ll be interesting to see which companies come out on top.

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Flattr makes micropayments easy

The WikiLeaks press has helped thrust Flattr into the public consciousness, but more importantly, it could fuel the growth of micropayments for years to come.

Flattr MicropaymentsOne of my favorite bloggers, Steve Pavlina, talks a lot about how easy it is to lose the forest for the trees when you’re trying to make money. In a great post called How to Earn $10,000 in One Hour, he urges creative people not to focus on their hourly earnings rate, but rather the big ideas that will change the world and/or change your life in a single hour.

I think Flattr is one of those concepts. Founded by one of the original creators of The Pirate Bay, Peter Sunde, Flattr charges members €2 a month for an account. Those users can then click the “Flattr” button when they’re on a Web site, listening to a song or browsing art by an artist they like online. At the end of the month, Flattr will pool all the Flattr buttons you’ve clicked and divide your €2 (minus a 10 percent fee) among all those artists, writers and bloggers, and give it to them. It’s a brilliant way to make it easy to donate to the Web sites and creatives you respect and want to reward.

Flattr was officially launched in August, and I only heard about it after reading in the mainstream press that it was one of the few remaining ways to contribute to WikiLeaks now that the dossier-dishing site has been hog-tied by PayPal, Mastercard (NYSE:MA) and Visa (NYSE:V). The WikiLeaks tie-in has helped thrust Flattr into the public consciousness, but more importantly, it could fuel the concept’s growth for years to come.

I know it’s made me into a convert. I haven’t opened a Flattr account yet, but I plan to this weekend. I’ll also explore adding Flattr buttons to TradingStocks.me, and I’ll donate to other sites whenever I get a chance to reward someone’s good work. It could be a great new source of revenue for a lot of people. Or it could go completely ignored. The important thing is, it’s evidence that truly creative people like Flattr’s co-founder Peter Sunde make it a habit of looking at old problems in new ways and attempting to find solutions. If it works, generating the idea probably took less than an hour, but it has the potential to be worth a whole lot more than $10,000.

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Credit card companies Visa (V), MasterCard (MA) tossed under bus

Visa Inc. (NYSE:V) fell further than any stock in the S&P 500 yesterday as it bled off 4.13 percent. It was joined at the party by MasterCard Incorporated (NYSE:MA), which dropped 3.05 percent. The catalyst? Analysts at Bank of America Corporation (NYSE:BAC) downgraded the stock from “neutral” to the dreaded “underperform.”

Visa Inc. (NYSE:V) fell further than any stock in the S&P 500 yesterday as it bled off 4.13 percent. It was joined at the party by MasterCard Incorporated (NYSE:MA), which dropped 3.05 percent. The catalyst? Analysts at Bank of America Corporation (NYSE:BAC) downgraded the stock from “neutral” to the dreaded “underperform.”

Analysts cited stiffer regulations and rising costs as they gave Visa and MasterCard the proverbial middle finger.

“We believe it will be difficult for the current balance of power in the payment system to be sustained longer term, with Visa generating 55% plus operating margins while issuers and merchants struggle to make money,” research analysts at BAC told clients in a note (per the Wall Street Journal).

Not everyone’s so bearish on Visa and MasterCard, though, even in the face of the seemingly harsh financial reform bill that passed in July. The companies posted great 2Q numbers (revenue jumped 23% at Visa), and they’ve been largely insulated from the credit crunch since they don’t make money off of credit card users but rather off the fees banks pay the companies to process credit card purchases.

The thing that’s really got BAC’s analysts in a tizzy, though, are regulatory changes that will increase competition among debit card processors, which could potentially lower Visa’s rake. Under the reform, U.S. merchants must have at least two options when they choose a debit card processor – no longer will they just have Visa as an option. That means good, old-fashioned American capitalism will be at play. That could be a boon for merchants and banks and a downer for Visa and Mastercard (at least as long as we can keep them from colluding in the shadows).