Magnetic Attraction

Samsung Acquires Swipe Emulation Start-Up

Samsung_payments_lSamsung announced that it will acquire mobile payment start-up LoopPay, which has developed a contactless payment method it calls Magnetic Secure Transmission (MST). This enables smartphones with a PayLoop accessory to make contactless payments at point-of-sale terminals that would otherwise require a credit card to be swiped. MST-enabled devices would be compatible with most existing cash registers, with the company claiming that LoopPay works at 90% of existing terminals in the US.

However, Apple Pay works at fewer than 10% of existing point-of-sale terminals in the US, and supports fewer than 100 card issuers. LoopPay claims to support more than 10,000 card issuers, including most loyalty and prepaid cards.

LoopPay users need to register their cards into the accessory, then can make a payment by opening a dedicated iOS or Android app, typing in a PIN and waving the smartphone over the payment terminal’s magnetic reader that would otherwise be swiped. An initial challenge will be convincing checkout clerks all is legitimate, and Samsung will need to first consider raising awareness to prevent awkward store checkouts.

Mobile payment is finally trending after years of false starts, and Samsung can be expected to embed MST into its coming smartphones. Apple Pay still has the coolness factor on its side, but money transfer is a numbers game, and LoopPay’s technology will challenge Apple Pay in the present market. Until every corner shop has a contactless payment terminal, Apple Pay users can’t leave their wallets at home.

Near-field communication (NFC) has always been one upgrade cycle away from reaching mainstream, but Apple’s Apple Pay gave it a purpose. Several of Samsung’s high-end devices include NFC, but the adoption of MST could result in more delays for the technology. Samsung might choose to license LoopPay’s MST to other smartphone maker, or continue to sell stand-alone LoopPay accessories — diluting Apple Pay’s mobile payment market share. Samsung is, after all, a key component manufacturer.

Apple’s solution appears more future-proof: the use of a fingerprint sensor for authentication might be a marginal time saver, but it has a touch of magical, space-aged charm. Samsung can also be expected to enable biometric-based authentication, though the swipe-type fingerprint sensors found on its Galaxy devices are slightly more cumbersome than touch-type sensors found in the iPhone 6 and iPhone 6 Plus.

Samsung has recognised that mobile payment is — thanks largely to Apple — really happening. The US market is going through a transition, and could leapfrog over the chip-and-pin payment solutions now used in many countries (though LoopPay says future iterations of its technology will support chip-and-pin somehow). LoopPay’s business model is also more appealing to retailers, as there are no additional fees, whereas Apple is rumoured to receive 0.15% from each Apple Pay purchase. It’s a small fraction, but one that large retailers already complaining about swipe fees would notice. Samsung has wisely positioned itself in the loop.

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