Samsung buys LoopPay: a jump to the head of the mobile payment queue?

As the digital wallet sector heats up, Apple and Google are jostling for position to be the brands that dominate the highly lucrative and competitive mobile payment sector. At the Mobile World Congress in Barcelona, Samsung’s chief executive, JK Shin announced its new Galaxy S6 and S6 Edge smartphones would feature Samsung Pay, the firm’s new mobile payment platform to rival Apple Pay. He also stated the new software would “push the boundaries in mobile payment”, a bold statement and one Apple and Google will be taking a close interest in. Samsung’s ambitions in the mobile payments space does not stop at launching a digital wallet. The mobile giant recently acquired US mobile payments start-up LoopPay, which uses proprietary and patented Magnetic Secure Transmission (MST) technology to turn virtually any payment terminal into a contactless payment solution.

In the UK, mobile service providers are hampered by a lack of access to the hardware itself and the restrictions that exist around consumer banking licenses, meaning up until now brands like Apple and Google have been restricted to after-market stickers or cases – on first look, LoopPay appears to have a similar issue. The technology is currently an add-on compatible with most Android phones allowing the user to effectively install any card with a magnetic strip on to the system. Where it currently falls down is that it requires carrying a separate bulky “card” to activate payments, again this is seemingly a minimal improvement on the current options in the market. More importantly, this isn’t a more convenient alternative to paying with your Visa or MasterCard.

What makes Samsung’s acquisition exciting is that it could potentially include LoopPay into its component chain, allowing a swift roll-out of the MST technology across its mobile products, including its tablets and smartwatches. Combined with LoopPay’s claim that its technology will work with 90% of the payment terminals currently in use, Samsung’s ability to grab significant market share is very likely. Having the mobile payment offering built-in and removing the need to buy additional hardware to run it, Samsung has a point of difference that no other providers come close to offering right now.

The overarching factors that will differentiate the mobile payment platforms for service providers including Samsung and Apple will come down to ease of use, mass retailer adoption and security. Consumers and potentially retailers are reluctant to adopt mobile payments, because the current infrastructure does not offer a better solution to existing card transactions. In time, however, people will adopt the technology as it becomes easier, safer and more widely accepted. Another factor which may hinder early adoption of Samsung’s LoopPay is that it has not yet incorporated tokenisation encryption technology, used by Apple Pay to prevent fraud, but they are planning to introduce it in due course.

When Apple launched its first generation iPad back in April 2010, it had a meteoric take-up by consumers. Adoption was not simply down to its size and weight, but because the device was more immediate. The time a laptop takes to power up and down, versus the immediacy of the iPad, is one of its strongest USPs. If Samsung can offer similar advantages to consumers and retailers, there’s no reason why critical mass cannot be achieved relatively quickly.

As the technology continues to develop, the opportunities for new digital wallet applications seem limitless, expanding beyond simple over-the-counter, low-value purchases and into everyday transactions such as mortgage and utility payments, fundraising and donations, medical payments and personal banking, to name a few. The benefits of mobile payment adoption are obvious, not simply for consumers, but also for participating retailers. The retailers and banks want to prevent fraud and increase the speed of transactions, while merchants want to be able to accept the next generation of payments without changing their point-of-sale systems, a feature that LoopPay’s MST solution has promised since it launched.

In the end, it is likely that whichever mobile company delivers a system offering an optimal user experience, easy installation and universal compatibility will take market share. Both Samsung and Apple need to demonstrate the benefits of using their mobile payment software, by delivering slick and effective campaigns, followed up with relevant data and analysis showcasing results and adoption rates. Peer-to-peer advocacy is another crucial element to aid success. Once the main high street retail chains, transport hubs and commercial organisations have completed successful trials of enabling mobile payments, more will definitely follow.

If Samsung can approach the payments industry with a broad mind and deliver MST technology to an ecosystem outside their own product range, it has the potential to be a significant player in the market. Whether or not a critical mass of consumers adopts new mobile payment technologies ultimately boils down to ease, safety and reliability – for both consumers and vendors. If the functionality of LoopPay is as promised, Samsung could be jumping to the head of the mobile payment queue.

Geoff Gower is creative director at ais London

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