Samsung Pay faces uphill climb against Apple Pay, Google Wallet

Samsung Pay's key potential advantage won't exist for much longer, as the United States moves to a new payment terminal standard

mobile payment (NFC)
Credit: Thinkstock

When Samsung announced the new Galaxy S6 and S6 Edge smartphones today, it also announced Samsung Pay, a mobile payment service that will debut this summer on the new Android devices.

But Samsung Pay is no slam-dunk, despite Samsung's dominance of Android smartphone sales in the United States.

Samsung Pay differs from Apple Pay and Google Wallet in that it is not limited to the use of NFC-compatible payment terminals. The new Galaxy S6 devices include support for MST (Magnetic Secure Transfer), the technology used in a payment system developed by a company called LoopPay that Samsung bought a week ago.

What it does is send the data normally contained in your credit card's magnetic stripe to a payment terminal. The NFC (near-field communications) technology long used in Galaxy and other Android smartphones does the same, except the MST technology is compatible with many, many more existing payment terminals than NFC is.

Samsung has provided few details of its upcoming payment service, but it said its MST deployment will not merely send the same data as on a credit card's magnetic strip -- which is easy for hackers to get from retailers' sales systems, as a rash of hacker break-ins during the last year has shown.

Instead, it will transmit a one-time code (aka token) for each transaction, as Google Wallet and Apple Pay already do. That way, even if the retailers are hacked, the stolen payment data is useless for making more purchases. (The lack of one-time codes in LoopPay to date has been a serious drawback.)

Samsung has said the Samsung Pay system will rely on the Knox security technology built into the Galaxy S6 and S6 Edge, suggesting that Samsung Pay won't be available for older Galaxy devices, much like how Apple Pay works only with the latest iPhones and iPads.

I don't think MST is long for this world, because a federal mandate is forcing U.S. retailers to upgrade their payment terminals this year to support the embedded EMV-standard chips the rest of the world already uses. Nearly all those new payment terminals will come with NFC receivers as well, so modern Android smartphones and iPhones won't need to worry about compatibility with magnetic-swipe terminals.

This may be a case where Samsung is back to its old habit of copying what Apple does, but in an inferior way.

This time it's also competing with Google, which recently bought the U.S. cellular carriers' Softcard service so it would stop blocking the installation of Google Wallet on Android smartphones in America. (The fact that U.S. carriers can block software that competes with their own services should be illegal. Somehow, Apple is able to prevent the carriers dictating the software include on iPhones, so it faced no such problem getting its Apple Pay service deployed.)

Google's latest move should make Google Wallet broadly available in the United States, which should get more users, banks, and retailers to support it.

Although Samsung has secured the backing of the same key credit card processors that support Google Wallet and Apple Pay, I wonder if it'll face the same opposition from U.S. carriers as Google had.

Even if not, Samsung Pay is up against both Apple Pay and Google Wallet for buyers' adoption, and it's not clear what the advantage of Samsung Pay will be once those EMV- and NFC-compatible readers come to the United States.

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