An American tradition may soon follow the way of the horse buggy and oil-fired street lamps. In fact, this tradition is as American as baseball, apple pie and even Chevrolets. It will be sad to see it go, but in its place comes efficiency and an easier way of life.

Deeply ingrained in the American consumer psyche since the early 1950s when it was first introduced, this tradition quickly became a worldwide phenomenon and changed the way daily commerce is conducted.

There is no question this tradition will be usurped by new technology, it’s only a question of when.

If you haven’t guessed it yet, I’m talking about the end of credit and debit cards, and the beginning of the new era of “smart wallets.”

If you haven’t heard about this technology before, my colleague Andy Obermueller, editor of Game-Changing Stocks, spells it out perfectly in this article.

This new smart-wallet technology utilizes smartphones as a new payment method that’s expected be seamless, exact and highly effective. And with the introduction of near-field communication (NFC) chips in newer smartphones, payments can be as easy as waving your phone by the cash register.

Just to provide some perspective of the kind of market share this technology can reach, 491 million smartphones were shipped in 2011 alone, with this number expected to be even higher in 2012.

What’s really amazing about smart-wallets from a retailer’s perspective is that coupons and special deals can be transmitted to consumers once they enter the store. This will be a powerful marketing tool and beneficial to the consumer.

If you have been inside a Starbucks (Nasdaq: SBUX) recently, then you’ve likely seen the point-of-sale (POS) smart-wallet technology in action. Established firms such as Google (Nasdaq: GOOG) and its Google Wallet, along with eBay’s (Nasdaq: EBAY) PayPal have already built out infrastructure to capitalize on the mobile wallet revolution.

Smart-wallet payments are expected to soar $1.4 billion by 2017, according to Javelin Strategy and Research Group. Some estimate the complete adoption of smart wallet technology to take place as early as 2016, but others say it could take at least a decade. But rather than wait for this game-changing technology to be completely adopted, investors would be wise to get in now.
 
Now that the case has been built, what could an investor do to take advantage of the smart wallet revolution?

We all know the obvious tech stocks, eBay and Google, will take a big piece of this pie. But as Andy points out, many other stocks will stand to benefit.

VeriFone Systems (NYSE: PAY), is perfectly positioned to capture the lion’s share of the change.

VeriFone has the one thing that none of the start-ups in the smart-wallet business has: Payment infrastructure already in place.

If you walk into practically any retailer in the United States, you’ll likely see VeriFone’s credit/debit card swiping terminals at the checkout counter. This places VeriFone head and shoulders above Google and the other high-tech competitors. It is much easier to convert a merchant to use smart-wallet technology if the basic infrastructure is already installed, which is why high-tech rivals have started to form partnerships with payment processors.

For instance, the company has recently teamed up with eBay’s PayPal to allow PayPal payments in all of its retailer checkout lanes. In addition, a partnership with Google has added Google payment services to 40,000 VeriFone POS terminals.

Interestingly, VeriFone has posted solid results during the past two years, but the stock price has not reflected the performance, which means now is a great entry-point. In the third quarter this year, VeriFone’s revenue soared 56% to $493 million, compared with a year ago, but this number missed over-optimistic analysts‘ estimates and shares were punished lower once again.

VeriFone Systems has been beat down into a serious value zone, but is clearly resting on substantial technical support right now.
 

Risks to Consider: There is always risk when investing in the stock market. With VeriFone, the risk primarily comes from competitive upstarts, such as Square and others still in the infancy stage. While VeriFone has a huge head start due to existing infrastructure, there remains risk of an upstart turning the tables eventually. Always use stops and position size properly when investing.

Action to Take –> I truly believe the end of the credit-card era is near, and VeriFone is one of the companies best positioned to profit from the smart-wallet revolution. Given its current low price at about $28 a share, the stock is a great buy right now. Buying in the $30 area with stops at $25 and an 18-month target price of $40 for a 40% profit potential makes sense. I also wouldn’t be surprised to see shares take out the $55 high.