Samsung Pay’s U.S. launch - let battle commence.
The highly anticipated launch of the third big mobile “Pay” player finally happened last week in the U.S. Just weeks after Android Pay announced its debut into the mobile payments ecosystem and about a year since Apple Pay’s launch, Samsung Pay sets its sights on the US mobile payments market. This time, however, things could turn out a little different. The question everyone is asking is, will Samsung Pay, with its different approach to payments using mobile at the physical point of sale (MST - Magnetic Secure Transmission), be the payments player that makes consumers reach for their phones and not their plastic cards?
To mark the launch, Samsung will be embarking on a tour in seven of America’s ‘most vibrant and iconic cities’, says the accompanying press release: “Samsung will give consumers in Austin, Dallas, Atlanta, New York, Chicago, San Francisco and Los Angeles a special opportunity to unlock special offers and prizes through Samsung Pay. At each stop, Samsung will partner with local retailers to provide discounts on items, hands-on activities and other experiences to give consumers an opportunity to interact with Samsung Pay to demonstrate the convenience and safety of the service, which can be used to pay almost anywhere you can swipe or tap your compatible cards.”
Initial partners include the major credit card networks — Visa, MasterCard, Discover and American Express — and some big issuers, including Bank of America, Chase and U.S. Bank. Samsung Pay uses digital tokenization, Samsung KNOX, and fingerprint authentication to provide secure payments. The mobile payment service is compatible with most existing and new terminals, including most magnetic stripe, EMV and NFC terminals. “Samsung Pay works with almost any card terminal from day one and Galaxy owners can shop with a wallet they never knew was always in their hands,” Injong Rhee, EVP of Samsung Electronics, Global Head of Samsung Pay, said in a company news release.
The big difference, of course, is its MST technology, which enables Samsung Pay acceptance at just about every terminal that today accepts any mag stripe or EMV card without merchants having to change anything at their points of sale to accept payments made using it. This feature works with a metal coil that is formed in the shape of a loop. As current passes through the coil, a magnetic field is formed. This allows for ‘communication’ with magnetic card readers. The functionality of MST technology is not dissimilar to the way a credit card is swiped through a card reader. With regards to MST and Samsung phones, your phone is placed above the credit card reader and ‘communication’ occurs between your phone and the POS.
In South Korea, where Samsung Pay was piloted this past summer, it was able to onboard 500,000 consumers in just about a month, who drove 1.5 million transactions accounting for $30 million in transactions in its first month, far overshadowing prior attempts by other players in Korea to make hay at the physical point of sale using mobile devices.
Samsung is also facing increasing competition from within its own ranks. Google recently inked a deal with telecom giants T-Mobile, AT&T, and Verizon to acquire Softcard tech. As a result, Android Pay is going to be pre-installed on multiple Samsung smartphones as well as the newest versions of Android OS. But skeptics remain. Consumers are likely to be slow to adopt the technology for several reasons, notably: There are so many available options for consumers, and Google’s pre-existing agreement with mobile operators.
Separately, Google has also updated its wallet app to offer peer-to-peer payments and wallet-to-bank transfers. Android and iOS users can now send money to anyone in the US with an email address, even if they do not use the app themselves. With bill splitting, activity notifications and the ability to set up recurring transfers thrown into the mix, it is clear to see that the internet giants are intent on taking bank disintermediation even further.
But perhaps the biggest hurdle faced by the mobile payment market is the so-called ‘Couch Commerce’ consumer (I forget where I heard that description first). Remember that Facebook has introduced the Groups feature where just about anyone can set up a Group to buy/sell merchandise. eBay already has several hundred million registered traders, and Twitter is soon adding buy/sell functionality too. These social media innovations are being designed for maximum consumer convenience and to dramatically reduce the bounce rate. With online commerce becoming the biggest drawcard, Twitter and Facebook are trying to displace eBay as the premier social media e-Commerce giants.
So while the likes of Apple, Google and Samsung may be fighting a battle over who gets used most at the physical POS, the real war could be taking a turn into a completely different field with a different set of consumer driven specs. The ‘real’ battle may not be waged over the counter - but on the couch!
Until next time,
Steve Atkins
Contactless Intelligence
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