In what looks to be a win-win scenario for all involved, American Express (AXP 1.16%), MasterCard (MA -0.01%) and Visa (V 0.10%) are banding together to protect the consumer's sensitive data and the future of their businesses.

The three companies recently announced an initiative to form a new global standard in payment security, the deployment of which will benefit the credit card titans, merchants, and consumers alike. 

The future of payments
The payment solutions business is one of the fastest growing industries in the world, and this is an easy trend to understand. Approximately 80% of consumers in the world and 50% of those in the United States still use cash and checks as their primary forms of payment. As the world continues to become increasingly urbanized, larger numbers of consumers will have access to credit and debit cards. Global initiatives like MasterCard's 'Africa: Navigating The Next Cashless Continent' project are helping to introduce new geographic markets to credit and debit and speeding up the transition in the process.

It is not only about an increasing number of people using credit and debit cards. It is also about constantly innovative technology that allows consumers to make purchases from almost anywhere they choose. The dominance of e-commerce, the rise of small business-friendly payment solutions such as Square and Intuit, and the seemingly endless supply of smart phones and tablets mean that mobile payment solutions are here to stay.

The growth
In this environment, the three major credit card companies have done very well, and investors along for the ride have profited immensely. In 2013, shares of MasterCard have led the way forward, up 50% year-to-date, while shares of American Express are up 42% and shares of Visa are up 30%. 

Even more impressive is that the projected growth for the credit card giants in 2013-2014 is robust. The following is a breakdown of the companies and their projected growth rates: 


American Express



Revenue Growth 2013




Revenue Growth 2014




EPS Growth 2013




EPS Growth 2014




Numbers courtesy of Yahoo! Finance

While MasterCard and Visa are expected to be the clear standouts with regard to both revenue and earnings-per-share growth in 2013-2014, American Express is still projected to offer solid growth as well. Additionally, American Express trades at much cheaper valuation multiples than MasterCard and Visa and has the highest dividend yield, which makes it a nice alternative for investors who are averse to risk.

While the growth story appears to be very much intact, the kings of credit are not resting on their laurels. The management teams at all three companies understand that the key to sustaining growth is to give consumers no reason to leave.

The most important aspect of any payment transaction, even more important than convenience, is safety and security. With massive infrastructures already in place, American Express, MasterCard, and Visa are joining forces to develop a global token standard that will enhance security, simplify transactions for consumers and merchants, and be applicable to both new and existing payment platforms. 

The way it works is simple; merchants will no longer see consumers' account numbers at the point of sale but instead will only see a digital token. Account numbers, which can be easily stolen, would only be available to the card-issuing banks that back the accounts. This process could eliminate a good deal of fraud and place less burden on merchants to actively protect sensitive consumer information. As such, the token system benefits all parties involved and should be a welcome enhancement to the existing payments infrastructure.

The hidden benefit
Of course, the credit card companies stand to benefit from tokenization as well. The main idea behind implementing the system is to create a universal standard of safety and security. This directly reinforces the power that American Express, MasterCard and Visa have over consumers and any new alternative payment service providers that may emerge in the future.

Visa CEO Charlie Scharf explained it best in the company's recent conference call: 

For the long-term it creates a framework, as new network participants emerge to ensure the security and the integrity of the payment system is in fact maintained. And when I talk about the integrity of the payment system, I'm including protecting the position that we have and our clients have in the value chain.

Why it matters
Investors will benefit from the token system as well since the new standard in security will undoubtedly better position all three companies for the future. In addition to bolstering growth, the token system will add protection to the companies' valuable business moats, which will ultimately make for safer investments. Therefore, it looks as if three of the best growth investments on the market are about to get even better!