RBI asks banks to implement safety measures for card usage

In order to minimise fraud cases and ensure security of transactions, the Reserve Bank of India (RBI) on Thursday asked banks to implement various safety measures related to credit card and debit card usage over a period of next two years.
The central bank directed banks to strengthen the existing payment infrastructure and future proofing system along with adoption of fraud risk management practices within a period of next 12-24 months, RBI said in a notification.
"The increased usage of credit/debit cards at various delivery channels also witnessed the increase of frauds taking place due to the cards being lost/stolen, data being compromised and cards skimmed/counterfeited. There is, therefore, an imperative need to secure such card based transactions...," it said.
It also emphasised on the need to migrate to Euro pay MasterCard Visa (EMV) chip and PIN based cards from the present magnetic strip cards as the later is vulnerable to skimming and cloning.
"The need for a complete migration to EMV chip and PIN based cards could be considered based on the progress of 'Aadhar' (Unique Identification Card) in about 18 months," it noted.
As per the circular, the central bank has directed banks to implement improved fraud risk management practices by September 30, 2012. The banks have also been directed to strengthen merchant sourcing and monitoring process by September 30, 2012.
The central bank also given a timeframe till September 30, 2013, to banks for securing the technology infrastructure.
To strengthen infrastructure for accepting these cards, RBI has said that commercial readiness of acquiring infrastructure to support PIN at POS (points of sale) should be ready by June 30, 2013.
Similarly, the enablement of all POS terminals to accept debit card transactions with PIN should be completed by June 30, 2013.
The apex bank also directed banks to be ready from technical perspective to issue EVM cards by June 30, 2013.

Mastercard, Visa Best Positioned To Profit Among Credit Card Companies

American Express.
A quick look at the fundamentals shows this company currently trades at 12.05x forward earnings, price to book value of 3.29 and projected EPS growth next year of about 5%. Also important to mention is the high debt to equity ratio of 3.58. This is a scarily high number and looking at the total debt over 5 years, there has been little to show that management is concerned with paying down this debt. Rates may be low for some time but even at low rates of interest the company is still throwing money out the window in interest payments.
Next Discover Card Financial Services (DFS).
Fundamentals for discover card are slightly more promising that AXP's with a forward P/E ratio of 8.79 and debt to equity ratio of 2.4. DFS trades slightly below twice book value at 1.92. The company also has cash on hand, about 6.91 per share. This should help the company lower its debt and secure the financial stability of the company.
MasterCard.
The #2 company in regards to market share, the company exhibits some extreme fundamental data. MA trades currently about 2 times the P/E ratios of the previous two companies. Its earnings multiple is 16.65 yet this is justified by the company's 18% growth in EPS expected next year and over the next five years. The company has no debt which enhances the company's financial stability and has an outstanding $28 per share of cash on hand. This cash on hand is equivalent to 8% of the stock price. This leads me to believe the company may be planning a significant share buyback and/or may increase its current dividend or announce a special dividend. On the negative side, the company trades 8 times book value which is a very large over-pricing, which may cause some selling pressure moving forward.
Visa .
Visa is the #1 company in regards to market share and currently trades at 15.91 times forward earnings and also has no debt to payoff. Visa also has its high P/E ratio justified by a growth rate next year of 15% and a 5 year growth rate of 18%. Visa has about 4.68 per share of cash on hand which it may use to continue its ongoing share buyback plans.
Intangibles
AXP is one of the few cards that still charges its users to have the card and the rates are not cheap. Of recent, the company has focused on promoting its brand by waiving the annual fee which should help spur growth, but the key to the company's success will be whether or not it can hold on to those customers to generate the fee revenue.
DFS is more than a credit card company, it is a financial services company. Over 70% of all credit card users have stated that they use the company's website to pay bills or monitor their statements. Through this usage, Discover is able to promote its financial services business such as online banking and CDs. This area may offer DFS a growth opportunity that isn't available through the other card companies.
What went into my decision:
1. Visa has the largest circulation of credit and debit cards by almost double its next competitor, MasterCard. It has global growth potential that is already being implemented and it's in the process of reaching untapped markets and catering to unique curcumstances around the world, such as in India, where debit cards, not credit cards, are the primary medium for payment.
2. MasterCard has the ability (and has already begun) to expand overseas but will really need to break through in a big way since Visa already has a 2:1 advantage in cards issued. Apply for Credit cards with best deals and offers
3. Discover Card has great growth potential horizontally with its online banking division, however, vertically I see growth in the credit card industry to be tough at best.
4. American Express won't have much of a future if it doesn't pay down the debt and alter its business model. With the changing economic times, so must American Express change its business model to phase out annual fee cards. When it comes time for businesses, especially small businesses, to cut costs and find savings wherever they can, finding an alternative to American Express will be a no brainer.