Samsung Electronics, one of the leaders in smartphones, for years has been a spectator as Apple created a services ecosystem to support its products. However, the Korean tech giant is now ready to take the fight to its US opponent.
Apple offers its users the ability to pay by simply tapping their iPhones on sales terminals. They can purchase train tickets, coffee, snacks, etc., which is a fresh new revenue stream, just like iTunes music and their entertainment service. The banks that are working with them pay a very small charge for each transaction that is processed. This fee is reported to be 0.15 percent in the US.
What will Samsung offer?
Samsung has been trailing behind its competitors in both services and software, but has decided to take a different path. Samsung is not charging their financial partners any fees, because they see Samsung Pay as an engine that will drive sales up for their phones and other devices.
Elle Kim, who is the Samsung’s Global Vice President of Samsung Pay, told Reuters in Sydney, “We’re a hardware company, and at the end of the day I think what we’re trying to do is get people who hold (one of) our phones and use it … to just love it more.”
As of now, it’s in the early stages ; the companies’ payment services have been direct competitors since last September in the USA, Australia and Singapore for just a couple of weeks, and China for 4-months. Apple Pay is also available in Canada and Britain, while Samsung Pay is also available in Spain and South Korea.
A worthy competitor
Last year, Apple Pay usage totaled $10.9 billion, with the majority occurring in the United States. This is miniscule compared to China, where last year an estimated $1 trillion worth of mobile transactions were completed, dominated by Internet giants Tencent and Alibaba, both of which have great ambitions to expand their business outside of China, but to date have not built any significant inroads.
On Tuesday, Samsung said its payments had processed over $1 billion in South Korea since it launched in August, which is just a fraction of the country’s more than $500 billion in credit card transactions last year.
There aren’t any good reasons why the banks can’t work with both competitors, because these technologies are not exclusive; however, Samsung’s approach could help it to quickly scale up with banking partners.
An additional weapon
Samsung Pay armor includes an additional technological weapon.
Apple Pay can only be used with sales terminals that have been equipped with Near Field Communications (NFC) technology, whereas phones that are compatible with Samsung Pay use both NFC and Magnetic Secure Transmission (MST) which is older and mimics the magnetic strip on traditional payment cards.
This will provide Samsung with an edge in some countries like the USA, where NFC terminals are far from everywhere, says Thomas Ko, Samsung’s Service R&D Team’s Vice President.
Ko says, “Mobile payments need at the end of the day to make it available as much as where plastic is acceptable. If the mobile payments cannot match it, it’s very difficult for someone to replace their wallet with a mobile.”