Samsung Pay's ability to allow mobile payments while mimicking plastic card transactions will make it harder for rivals and merchants to strike back by disabling NFC at the point of sale when the system debuts later this year.
Apple Pay, Samsung Pay's most notable rival, has quickly won over banks and earned buzz with consumers but has struggled with merchants, with some
"Samsung Pay is not likely to be immune to retailer prohibition, it's likely that retailers that choose to will be able to exclude these transactions through software," said Rick Oglesby, a senior analyst and consultant with Double Diamond Payments Research.
But it would be harder for merchants to block Samsung Pay, particularly since they are unlikely to turn off mag stripe acceptance, which is also available via LoopPay, said Michelle Evans, a senior analyst at Euromonitor, adding the complexity of tracking down the source of magnetic stripe payments for selective disablement would make such a move unlikely.
"It is going to be very interesting to see how MCX is going to react to this, along with their merchant members that may have signed some exclusivity on mobile wallet acceptance," said Pascal Caillon, general manager of North America for Proxama, in an email. "As far as our current understanding of [Samsung Pay's technology] goes, it will likely be really hard for the merchants to identity such transactions and shut them down."
MCX did not respond to a query by deadline.
Samsung Pay is expected to launch by the
Samsung's big advantage is its ability to quickly work at very large retailers, Oglesby said.
"I believe that the biggest benefit of the Loop acquisition is that Samsung Pay will work at the MCX merchants. It's not about having something that works at 90% of merchants, but rather something that will work at major big box retailers that have customer facing terminals," Oglesby said.
Gaining consumer uptake and winning over mobile operators may be more challenging for Samsung. Consumers may have to change payment habits, and Samsung also faces challenges from Google's new mobile payment alliance with mobile operators and the waning of mag stripe as a payments option.
"While I believe that Samsung has a much better interim solution, it is unclear if it can win over the carriers, banks and consumers," said Tim Sloane, vice president of payments innovation at Mercator Advisory Group. "I had hoped that there would be increased clarity with the Samsung announcement, but instead clouds lifted and the fog rolled in."
Sloane questions how Samsung can get consumers on board. "The [former Softcard] mobile carriers are
For merchants and retailers, there's no equipment or updates necessary to adopt Samsung Pay, said Caillon in an email. But consumers will have to change their habits. "The [Samsung Pay] experience will be more open ended than it is with contactless POS. For each different POS, consumers will have to determine where to place the handset next to the mag stripe reader to conduct the transaction, leading to possible confusion or a fear of trying it," Caillon said.
And while LoopPay makes it easy to add loyalty and redemption offers into retailers' m-commerce programs, merchants will still have to instruct consumers on how to perform the transactions. "This may sometimes change purchase flow," Caillon said. "For example, in the future, will it be natural for a merchant to grab your phone to complete a transaction?"
Time to market and an initial reliance on
"While Samsung Pay can deliver on magnetic stripe transactions with the acquisition of LoopPay, that's a diminishing capability, particularly since the vast majority of cards in the U.S. will be chip enabled by October 2015 [70% of credit cards, 41% of debit cards, and 59% of all terminals, according to Aite Research]," said Peterson.
Samsung did not return a request for comment by deadline. LoopPay has outlined the steps it is taking to address EMV on its
"It's going to take a while for Samsung to get its product to market, probably well after the Google Wallet launch has taken place and likely nearly a year after Apple Pay," Peterson said. "Lastly, it's only going to be available on the Galaxy 6, which is going to be a smaller marketing initially. And unlike Apple, Android customers can choose from any number of OEM devices, so there's no certainty that a current Samsung customer would select a Galaxy 6 over HTC, or Nexus when it comes time to buy a new device. Apple Pay's trajectory is much more certain, given the loyalty of Apple customers."
