Every time you buy something via iPhone, these financial firms get paid American Express is already the industry leader in returns on equity. So the company’s new partnership with Apple can only help investors. Guess which U.S. bank has the highest return on equity? What — you don’t care? OK, then, it seems you don’t want to make money. Because Apple’s AAPL, -1.05% new Pay service announced Tuesday will be lucrative for the iPhone maker’s financial partners. They include American Express Co. AXP, -1.16% Visa Inc.V, -0.69% and MasterCard Inc. MA, -0.21% With hacking stories featured in the news on a daily basis — including theongoing credit-card data hacking of Home Depot Inc. HD, -2.08% customers and the iCloud celebrity-photo breach — consumers are receptive to a new and more secure mobile-payment system, and having Apple lead the way, in partnership with the three largest U.S. credit-card companies, could be a home run for investors over the next several years. After rising as much as 3%, shares of Apple ended with a slight decline at $97.99 at the close Tuesday, following the company’s announcement of two new iPhone 6 models, the Apple Watch and the Apple Pay payment-processing service. American Express was down 1% to close at $87.90, while Visa’s stock gave up 1% to close at $214.28 and shares of MasterCard were up slightly to close at $76.07. Discover Financial Services DFS, -0.94% which runs its own credit-card payment-processing network, was left out of Apple Pay, and the company’s stock was down 1% on Tuesday. Discover partnered with eBay Inc. EBAY, -2.77% subsidiary PayPal last year in a new mobile-payment-processing service that reads card information with smartphones. Shares of eBay were down 3%. Apple can be a major challenger to PayPal because anyone using an iPhone for an eBay purchase maybe find it easier and more secure to use Apple Pay. (For now, Apple Pay can only be used with the new versions of the iPhones.)Apple to dominate in mobile payments Heading into today’s product announcements, there was plenty of coverage of Apple’s declining share of the international smartphone market. However, in the U.S., Apple leads all manufacturers with a 42.4% market share, according tocomScore’s most recent numbers for July. That was up significantly from 41.4% in April. Based on that giant market share in the world’s largest economy, Apple Pay could become very popular and very lucrative if the company and its partners get the security right. The new service will be available in the United States in October, so it will take some time for the service to hit critical mass as Apple customers upgrade and new users make the switch. The new payment system looks like a winner for many reasons. For starters, the iPhone is the device used to make the payment. There’s no need to whip out a credit card, which uses 50-year-old technology, according to Apple. Apple Pay will use information already stored within iTunes accounts. Each transaction will have a unique identifying number and use a dynamic security code. A credit or debit card number won’t be stored on the phone. For added security, the iPhone will use a fingerprint scan, and cashiers won’t see a customer’s name, credit card number or security code. And users will not be limited to using Apple Pay for store purchases. They will also be able to use the new technology for Internet and app-based purchases. Here’s a bit more about Apple’s three new financial partners:American Express Among the biggest 100 U.S. bank holding companies by market capitalization, American Express has achieved a return on common equity of 28.48% over the past 12 months through June, according to FactSet. That’s by far the strongest ROCE among the 100 largest banks. (And that answers the question in the first paragraph.) The only other bank among the largest 100 that comes close to that performance is Discover Financial Services, with a return on common equity of 23.3%. Jeff Reeves recently called Discover his favorite financial stock. Getting back to American Express, such a strong ROCE means investors are being rewarded over the long haul . The stock is flat this year, but the share count is declining as a result of buybacks, and the company reported a 6% year-over-year increase in second-quarter revenue net of interest expenses. Non-interest expenses were up only 2%. Earnings per share rose 13% to $1.43, reflecting the lower share count. The stock’s five-year total return is 186%, compared with a 117% return for the S&P 500 Index SPX, -0.65% American Express closed at $88.93 Monday and traded for 14.7 times the consensus 2015 EPS estimate of $6.05, among analysts polled by Thomson Reuters. That’s not particularly cheap for a bank stock. The aggregate forward price-to-earnings ratio for the KBW Bank index is 11.5. But over the past five years, none of the 24 large-cap banks included in the index have achieved ROCEs anywhere near those of American Express. For another point of comparison, the S&P 500 Index trades for 15.1 times aggregate 2015 estimates. But you get what you pay for, and for shareholders of American Express, the strong financial performance should be very rewarding over time. Visa and MasterCard Unlike American Express, which is a lender in addition to running its own payment-processing network, Visa and MasterCard are pure-play processors. Both companies have been performing very well, with Visa increasing its second-quarter operating revenue 5%, while operating expenses declined 3%. Those good results, along with a 3% drop in the average share count, led to a 15% increase in earnings per share, to $2.17. MasterCard boosted its second-quarter net revenue by 13%. While operating expenses swelled 15%, its average share count declined 3%, so earnings per share rose 14% to 80 cents. Neither Visa nor MasterCard are cheap. Visa closed at $215.77 Monday and traded for 20.8 times the consensus 2015 EPS estimate of $10.35, while MasterCard closed at $76.23 and traded for 21.28 times the consensus 2015 EPS estimate of $3.58. But you pay a premium for growth and performance. All three companies keep hitting good numbers and rewarding shareholders by lowering the share count. Financial stocks and buybacks may be boring, but as we saw with Apple’s announcement today, these companies play large and important roles. Their long-term prospects are bright, as long as they keep growing and striving to stay on the cutting edge of technology. The Apple partnership may only provide a modest boost to the three payment processors’ bottom lines in the short term. But the new service is an excellent defense play, keeping them from being shut out of mobile payments.link