The Dow Treads Water as Visa Rises, American Express Falls

The future of how people make payments has huge implications for the Dow Jones Industrials.

Jun 10, 2014 at 12:30PM

The Dow Jones Industrials (DJINDICES:^DJI)have lost just 14 points as of 12:30 p.m. EDT. Without much in the way of earnings reports or economic data, market participants are torn between the positive momentum the Dow has enjoyed lately and concerns that the market is long overdue for a substantial correction. One area that has a lot of promise is electronic payments, and Dow members Visa (NYSE:V) and American Express (NYSE:AXP) are adjusting their overall strategies in order to take maximum advantage of the shift in how people pay for goods and services around the world.


For American Express, which is down 0.6% on the day, the primary challenge has been to figure out how to retain the company's reputation for having a high-end clientele while also offering products and services that appeal to a wider audience. Just yesterday, American Express announced a loyalty program in conjunction with ride-sharing service Uber, tapping into the popularity of the app-driven alternative to taxis in order to connect with a more mobile-savvy audience. Essentially, AmEx knows that those who are already comfortable enough with the mobile revolution to use Uber are also more likely to use smartphone-based electronic wallets. Getting those customers into its ecosystem is a great way for American Express to set the stage for future advances in payment technology.


American Express has also looked to serve the underbanked through its Bluebird service, which combines mobile-banking features with the utility of prepaid cards. Offering a separate brand that nevertheless capitalizes on the American Express name is a good way to broaden the Dow component's audience while also retaining the upper-crust reputation of its traditional cards.

Meanwhile, Visa rose almost 1% as investors anticipate the beginning this week of the World Cup. Visa stands to gain huge amounts of exposure from its position as a major sponsor of soccer's global championship. Recently, though, Visa has had to deal with a distraction on the soccer front, joining other major sponsors in demanding investigations from the sport's governing body for alleged corruption in selecting the site of the 2022 tournament. But more importantly for the new Dow component's long-term strategy, the company needs to show potential customers in key emerging markets -- many of which are nations that are most likely to have success in the World Cup -- that the Visa brand has global staying power. Moreover, having the ability to make payments easily worldwide is increasingly important in the global economy, and Visa has the chance to make a case for its capabilities on that front as well.

The Dow Jones Industrials have exposure to many industries, but every business relies on handling payments efficiently. Visa and American Express are at the cutting edge of the mobile-payment industry, and if they're successful in tapping the full potential of this market, it will help boost the Dow accordingly.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends American Express and Visa. The Motley Fool owns shares of Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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