Samsung Pay LoopPay MST

Samsung acquired the mobile payment startup LoopPay barely a week before Google’s announcement of Softcard deal. This has put Samsung in an interesting position where it is one of the first device manufacturers to provide a wallet offering directly competing with Apple Pay. The plans of how Samsung will support Android Pay without stressing the relationship with Google is unknown at this point in time.

 

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Strengths:

  • Samsung Pay is directly aimed at Apple Pay in most of the capabilities being offered. It supports tokenization and biometrics and has relationships with the major card networks and banks as launch partners.
  • Samsung Pay boasts a much broader adoption rate (close to 90% of POS) for the terminals in US due to its inclusion of LoopPay’s Magnetic Secure Transmission (MST) technology, allowing it to be used in traditional non-NFC, magstripe only POS readers.

Weaknesses:

  • Samsung Pay launches in the summer of 2015. This delay provides a significant lead for Apple Pay, which launched in October 2014.
  • Samsung Pay stores credentials in the cloud, however, the token is transmitted from the cloud to the device at the time of purchase. This requires cellular or data connection which prohibits usage in areas which have weak cellular signals or no data connection. However Samsung Pay may fallback to LoopPay’s MST to complete the payment.
  • Unlike Apple Pay, the customer must launch the app to use Samsung Pay to make a payment near the terminal.
  • Samsung Pay only supports POS purchases, (both NFC and existing magstripe). There are no in-app purchases.

Opportunities:

  • Samsung may decide to make the LoopPay technology a hardware chip, which could be resold to device manufacturers, making MST available to most of the Android family of phones.
  • There is discussion that Samsung may waive all fees associated with its new mobile payment service. It won’t charge the usual 0.0015% fee on each transaction
  • Samsung Pay launches in US and Korea at the same time. It would be interesting to observe the success of this in an international market.
  • Samsung Pay also supports Private Label Credit Cards (Apple Pay does not).
  • The slower growth of NFC terminals in US may result in a timing advantage for Samsung Pay with Loop MST technology. Most other mobile wallets rely on NFC capabilities.

Threats:

  • With Google announcement of Android Pay API, it is unclear how Samsung would promote their offering and differentiate it when they will also have to install Google Wallet in their phones.
  • With the EMV Liability shift, most of the merchants who decide to upgrade may move to an NFC card reader to future-proof their investments. This puts into serious question how long Samsung will be able to maintain the benefit and advantage offered by the LoopPay acquisition.

Analysis: Samsung Pay may be the first direct competitor to Apple Pay to launch in the US with a similar feature set. Samsung has built the S6 and S6 Edge devices to be a premium offering, and wants to go head on with Apple iPhone 6 and iPhone 6 plus.

While many industry analysts question Samsung’s strategy to drop some of the features loved by Android users (waterproof, replaceable batteries), the S6 line of phones may provide a very strong alternative to the iPhone 6 and 6 plus.

Apple stole the news for the record number of phone sold in Q4 2014 (approx. 74 million), with Samsung losing the top spot but still managing to sell a relatively close 73 million phones worldwide (TechCrunch). With a 24.7% world smartphone sales market share (compared to Apple’s 15.4%), Samsung still has a comfortable lead/user base. If this user base upgrades to the S6 device from the prior iterations, gives Samsung Pay a try, and likes what they see, Samsung Pay will manage to keep a spot in the mobile wallet payments race.

Author: Jason Williams

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