Samsung has agreed to buy a mobile wallet startup called LoopPay. The deal is a necessary one for Samsung, which needs to bring a mobile payment service to market sooner rather than later.
LoopPay's technology has a key differentiator that may give Samsung a small advantage over Apple Pay, which is already available on the company's iPhone.
Apple Pay, Google Wallet, and Softcard (formerly Isis) all rely on NFC to make mobile payments a reality. NFC is required in the smartphone and the payment terminal. Users tap their phones to the terminal, the NFC radios exchange info, and the transaction is completed. NFC works really well. The problem, for retailers, is that upgrading their in-store payment terminals is expensive. That's why Apple Pay is limited to about 220,000 points of sale (out of about 12 million around the US).
LoopPay removes the need for NFC and pricy retail terminal upgrades. Instead of NFC, LoopPay makes use of the existing magnetic stripe reader already available in most stores. This gives Samsung the ability to offer mobile payments at a far greater number of retailers -- not just in the US, but worldwide.
"This acquisition accelerates our vision to drive and lead innovation in the world of mobile commerce," JK Shin, president and head of IT and Mobile Division at Samsung, in a statement. "Our goal has always been to build the smartest, most secure, user-friendly mobile wallet experience, and we are delighted to welcome LoopPay to take us closer to this goal."
Apple, and to a lesser extent Google and Softcard, have a head start.
All three services are already gaining mindshare with consumers, retailers, and card issuers. Apple has done an incredible job recruiting banks to support Apple Pay. Samsung would have to begin forging those same relationships before it can fully launch a mobile payment solution of its own.
Google Wallet and Softcard, despite their longevity in the market, have not seen the level of acceptance enjoyed by Apple Pay, but Apple's success has helped the lift the entire mobile payment landscape. Samsung could benefit from that, too, but it needs to ramp up quickly.
How soon could Samsung add LoopPay to its own products? The answer is soon.
LoopPay already has 60 million active accounts using the service. Samsung had a relationship with LoopPay prior to the acquisition, and Samsung already works with Visa and Synchrony Financial. Some think the Galaxy S6, which Samsung is widely expected to unveil in Barcelona early next month, will include some form of mobile payment service. Exactly how Samsung might incorporate LoopPay remains to be seen.
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