Samsung Pay, just over a year old and set to enter its 10th global market by the end of the year, is bringing more features to the U.S. that it first introduced in its home country — a place that is far different from the other markets the company targets.
The complete collection of services in the company's test bed of South Korea gives a glimpse into Samsung Pay's greater focus on consumer lifestyle. Samsung is, after all, an electronics company first, whose television sets, refrigerators, washing machines and other appliances have been a fixture in homes for almost 50 years.
And in the course of those those 50 years, the country welcomed a staggering amount of change.
After the Korean War of the early 1950s, South Korea was one of the poorest countries in the world. Per capita income was $67 in 1953; life expectancy was 50 years and literacy rates were around 40%. Today the world looks on South Korea as modern and democratic – starkly different from the bordering North Korea. It has the 11th largest economy in the world, with per capita income at $34,700 in 2015. Life expectancy is 82.3 years; literacy rates, 98%.
“Combinations of history and unique circumstances in the last 50 years have made [South Koreans] very open to change and willing to pay the price to stay ahead of the curve,” said Thomas Ko, global general manager of Samsung Pay. “Without adapting they wouldn't be able to survive.”
That South Koreans have sacrificed and planned to immeasurable lengths to turn their country around improve the quality of life for individuals has made it the "perfect testbed" for Samsung Pay, Ko said.
"Korea was not too big to fail."
These kinds of critical historical incidents have made all the difference in entire consumer populations’ attitudes to change, he added, at least in Korea – but also in the U.S., where consumer behavior toward new things doesn’t capture the sense of enthusiasm, or urgency. He suggested it could perhaps be a result of the financial crisis.
“If the banks had collapsed, Americans would have been forced to change a core part of their lives and adapt to new things that were not meant to be,” he said. “Korea was not too big to fail.”
But just because Koreans have been incredibly open to change doesn’t mean they’ve been quick to adopt Samsung Pay’s ideas.
“People, especially millennials, in Korea don't necessarily care for Samsung; they don't necessarily like the brand,” Ko said. "All these skeptics, critics and naysayers we get give us a lot of resilience in making sure we continuously innovate to be better.”
Despite those challenges, investing in Korea, experimenting, coming up with the right use cases for big data and creating the right timing to deploy features to the rest of the world has been the sequence of success for Samsung Pay.
“I see what we do in Korea as probably two to five years ahead of what we will see [globally],” Ko said. "I can do a lot of experimentation in Korea – how we take samsung pay into ATMs, membership, lifestyle – to see how customers behave. Once they like it, I believe the world will like it too and every country will take its own course of adoption."
But Samsung's ideas won't necessarily be easy to export to the U.S.
For better or worse, “the U.S. values resiliency; that you survived, that you stuck through it,” even if that lasting survival is never met with change, Ko said. “Staying true to who they are as Americans is much more valuable.”
Samsung hasn’t yet made certain features available to its users in the U.S., whose Samsung Pay presence is only a month younger than in its debut market of South Korea. The U.S. upgrade announced this week at Money 2020 includes location-based deals, coupons and in-app payments. In an interview ahead of the conference Ko also teased a bill pay planner function and Samsung-sponsored events featured in the app's homepage header.
"In Korea, we introduced cardless ATMs, online payments with banks; we are now enabling receipt identification services where we categorize all the receipts to their benefit," Ko said.
Additionally, Samsung Pay selected a number of dessert bars and cafes to promote across Seoul with InStyle Magazine, which mapped out the choices for their co-sponsored Dessert Road campaign. Each participating dessert spot gives customers a 10% discount if they settle the bill with Samsung Pay.
Promotions and incentives like that have barely hit the U.S., where payments behavior is different from Korea's regardless of the user – banks, merchants or consumers. Samsung Pay makes a difference in countries with low Near Field Communication penetration, said Haley Kim, a Suwan, South Korea-based Samsung vice president who oversaw the service's U.S. launch last year and now leads launches and operations for the Americas. The job now is to prove its use case in the U.S. by addressing the pain points presented by plastic cards and building better reasons to pick up the mobile phone to pay.
"I don't think you will ever replace credit or debit cards if you just fight them one to one," Kim said. "The plastic transaction is beautiful, there’s no real pain point," although U.S. consumers might argue the migration to EMV-chip card technology in the past year has made for a frustratingly slow checkout process. That could perhaps be the first pain point.
"The starting point is when you look at… the plastics you can start adding to reduce the size of your wallet and truly add some value [to your digital wallet]," she added. "You don't have to carry your unnecessary plastic daily."
Samsung Pay users are able to load gift cards and rewards memberships into their mobile wallets, but the need to physically remove a fare card to use public transportation or an ATM card to withdraw cash still exists – in the U.S., at least. In Korea, consumers can digitally reload their fare cards with their mobile devices and Samsung Pay users need only to tap their phones at the turnstile.
Samsung Pay could introduce U.S. transit payments in 2017, but "transit in the U.S. is very fragmented," Kim said. "Chicago's system is very different from San Francisco BART compared to the New York MTA,” for example. “Individual integrations would be difficult," she said.
Similarly with ATM transactions, Korean Samsung Pay users can prompt a cash withdrawal remotely and complete it until the point that the user taps the mobile phone to the ATM machine. Samsung Pay hasn't introduced that ATM capability in the U.S. because most machines aren't NFC-enabled – yet, Kim said, though she hinted that some ATM manufacturers have expressed enthusiasm in Samsung Pay's ATM possibilities.
Banks, however, are more interested in how they can utilize their mobile banking app for cash withdrawals at the ATM. Bank of America and JPMorgan Chase now have cardless ATMs, using the mobile app for identification and verification, for example. BMO Harris Bank, as well as several community banks, adopted cardless ATMs last year.
"I don't think ATMs are necessarily a game changer though, so I'm okay if U.S. banks start adding that feature more slowly," Kim said.
Her priorities are somewhere else.
"One thing I really want to do as fast as possible is make the [identification and verification] process easier," Kim said. "The only plastics we can't add are the drivers' licenses — because there's no standard network we can replicate — and maybe other student IDs."
