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Almost two weeks after the industry first saw its official glimpse into what Samsung planned to do in the mobile-payments market, the South-Korean based electronics manufacturer revealed Samsung Pay Sunday at the Mobile World Congress in Barcelona.
While Samsung Pay will not launch until the summer, it will come to the market with a distinct merchant acceptance advantage over Apple Pay and Google Wallet.
Samsung will use a two-pronged approach to mobile payments thanks to its recent acquisition of LoopPay, which developed a proprietary contactless payments technology that is supposed to work with 90 percent of the point-of-sale terminals deployed in the U.S.
Samsung embedded LoopPay's technology into the new Galaxy S6 and Galaxy S6 Edge smartphones. The new devices will still rely on NFC chips to enable users to conduct tap-and-pay transactions at contactless-enabled point-of-sale terminals. But if contactless is unavailable, LoopPay’s Magnetic Secure Transmission technology can "communicate" with magnetic-stripe reader currently present on all terminals. Samsung Pay will sense which option is available and adjust accordingly.
Samsung Pay's dual approach means more merchants will be able to accept the mobile wallet without an equipment upgrade. A large portion of Tier 1 merchants have already updated their terminals ahead of the EMV liability shift in October, but the option to switch on the contactless function lies with the retailer. Samsung Pay, however, would work regardless of the situation.
"As a result, this technology from LoopPay provides Samsung with a formidable option that meets the U.S. market where it stands today in terms of payment infrastructure upgrades," Michelle Evans, a senior analyst for Euromonitor International, wrote in a research note Sunday about the announcement. "Even after the U.S. completes its shift from mag stripe to chip-based cards, this technology from LoopPay will continue to have relevance for gift cards, as well as loyalty and membership cards.
"That functionality could be an important differentiator for Samsung moving forward and ultimately help to drive adoption for its mobile wallet."
Samsung Pay at first will be available to consumers in the U.S. and South Korea followed by a worldwide rollout.
Samsung Pay's specs are almost identical to what we saw Apple announce in September with Apple Pay. Samsung will let users load credit card information into the Samsung Pay app where it will then use tokenization to mask critical credentials. The wallet will also work in tandem with what Samsung calls an improved fingerprint reader to authenticate purchases.
Samsung Pay also comes to the table with the support of American Express, MasterCard and Visa. Payment processor First Data is on board, as are Bank of America, Citi, JPMorgan Chase and U.S. Bank.
Even with all the initial support from financial institutions, expect Samsung Pay to run into consumer adoption issues.
"As with any new payment service, it will take time before we see significant adoption, whether for Samsung Pay or Apple Pay, because it requires personal time investment on the side of the consumer to learn such a new service," Pascal Caillon, general manager of North America for mobile proximity commerce provider Proxama, said in a statement. "That being said, adoption may be quicker with Samsung Pay than it was with Apple Pay because Samsung Pay can be used in most POS environments."
A consumer's preference also will be an issue as when it comes to Samsung Pay adoption.
Google's recent acquisition of Softcard's technology from AT&T, T-Mobile and Verizon included a stipulation that puts Google Wallet as a preinstalled app on Android phones sold by mobile manufacturers. The Associated Press reported that Samsung Pay and Google Wallet will come on Samsung phones sold by those three manufacturers. Consumers will need to choose one wallet as their preference so that they will not be charged double for purchases.