Samsung Pay takes on Apple Pay, but goes further

Samsung introduced the Samsung Galaxy S6 and the Samsung Galaxy S6 Edge on Sunday, two sleek new smartphones that both feature the new Samsung Pay.

Like Apple Pay, Samsung Pay will let you enter your credit card information and create a tokenization that protects that information — creating a unique credit card number for each device — and payment data. It will even come with physical authentication in the form of a re-engineered fingerprint reader on the Galaxy S6: No more swipe, just tap your finger or thumb. It's very Apple Touch ID-esque.

Last month, Apple told us that a huge percentage of mobile payments at some major retailers are through its NFC-enabled Apple Pay on the iPhone 6 and 6 Plus.

But we know that very few smartphone-enabled mobile payments are taking place overall — so big percentages don’t quite make a trend.

Part of the holdup: Not all retailers are on board with the new payment systems. Not every point of sale has an NFC kiosk, and even some that do have disabled NFC while they wait for other options.

However, virtually all point-of-sale systems do have magstripe readers — that slot for your credit card to swipe through. Inside is a magnetic strip reader that pulls your payment info off the gray strip on the back of a credit card. That legacy system has been largely ignored by cutting-edge mobile payment systems like Apple Pay and Google Wallet.

The underlying technology in Samsung Pay is virtually identical to Apple Pay's because the tokenization system is MasterCard’s Mobile Digital Enablement System (MDES), according to Ed McLaughlin, MasterCard’s chief emerging payment officer.

“We’ve taken what you’ve do in chips on the [credit] card and using chips in device to do it," he said.

There is, however, one very big difference between Apple Pay and Samsung Pay. It could even be called a game-changer.

Remember that little story a few weeks ago about Samsung buying LoopPay? The mobile payment company used special hardware — the kind you might put on a smartphone case — to enable magstripe reading on smartphones. The acquisition made everyone realize Samsung was serious about building an Apple Pay competition. It may not have been obvious at the time that the two companies had been working together for some time, but this is proof.

The LoopPay technology is part of the Samsung Galaxy S6. “[It’s a] wire built into the back panel of handset," McLaughlin said. "If you can’t do contactless, put the wire near magstripe head, [it] pushes a transaction that emulates a swipe (like a card)."

He added that MasterCard has a vested interest in enabling all kinds of mobile payments: “One of the big themes for MasterCard is we see consumers moving to a huge range of connected devices. It’s not ‘a’ device it’s ‘the device.'"

For MasterCard, the LoopPay integration opens up the new Samsung phone to its existing infrastructure. Most retailers won’t have to do anything to accept payment through the Samsung Galaxy S6.

Phone owners will just hold up the phone’s special strip to the magstripe reader — really just a magnetic reader — to pay.

Of course, Apple sold tens of millions of iPhone 6 devices after launch, which means the Apple Pay technology is already in the hands of many, many consumers. Can the new Galaxy 6 achieve that same kind of penetration? Perhaps Samsung Pay with magstripe-reader integration will help propel the new phone forward, but it won't have the advantage right away. Samsung Pay won't launch fully until summer, and it will only be available in the United States and Korea to start.

What of Google Wallet? The NFC-based mobile payment technology has been around longer than any of the rest. It also uses MasterCard’s tokenization technology but lacks the consistency of Touch ID authentication and the ubiquity of magstripe support, clearly now an issue. The Google recently bought SoftCard, but the technology seems to differ little from Google Wallet’s.

Regardless, the trend lines are clear as day and point to a spot on the horizon where more people are using mobile devices to pay at stores.

Posted by : Gizmeon