In store mobile payments are the next big trend analysts and payment experts are predicting will hit retailers in the coming few years. Instead of reaching for our physical wallets, we’ll be tapping into our mobile wallets, benefitting from faster and more secure payments in bricks and mortar retail. While the technology is hardly new – Google launched it’s first mobile wallet back in 2011 – changing both consumer and merchant behaviour have been the biggest hurdles in gaining widespread acceptance to date. And while millennials will probably drag the boomers into the mobile wallet age eventually, getting merchants to invest in upgrading their hardware to actually accept mobile payments has proven significantly harder and continues to do so. This is no more true than in the states, where mag stripe technology is still a perfectly viable alternative for card present payments.
So, if Mohammed won’t come to the mountain, then the mountain must come to Mohammed. And that’s just what mobile giant Samsung have done, announcing the acquisition of mobile wallet company LoopPay this week. This second part of a three blog series looks more closely at how Samsung believes they can achieve market domination against the likes of Apple and PayPal using LoopPay’s technology. If you haven’t read part one yet, where I write about Apple Pay’s approach, click here.
Samsung – Merchant acceptance in the US will be strong, advantage less strong globally
Realising early on that NFC acceptance was going to be a barrier to mobile payment acceptance, LoopPay developed their own proprietary technology called Magnetic Secure Transmission™ (MST). MST basically allows a phone, held close to the mag stripe reader on an eftpos terminal to transmit a mag stripe to the terminal wirelessly. So MST replaces any form of physical card swipe. With MST, it’s easy to believe LoopPay’s claim of being the most widely accepted mobile wallet in the world. And with no need to get merchants to upgrade their terminals to accept LoopPay mobile payments, getting traction in the bricks and mortar shouldn’t be too difficult. To that end, it’s not clear how many LoopPay users exist today but with access to Samsung’s mobile handset market share of 26.6 %, the only way is up really. It seems likely the LoopPay technology will soon be provisioned on all handsets before they even make it into consumers hands.
So what are the downsides to Samsung’s approach, if any? Well if Samsung were to take LoopPay in its current form, it would represent a slight security downgrade from what Apple Pay are delivering to consumers. That might not sound like a huge hurdle but safety of personal data still ranks highly amongst consumers, sitting at 18% in a recent survey. With LoopPay technology, card data is still stored on the device itself however updating this to a tokenised service similar to Apple Pay shouldn’t be too much of a stretch for Samsung in the short to mid term.
The next hurdle I perceive is more around how quickly Samsung can get on the ‘front foot’ in markets like Europe and Australia. NFC enabled terminals already have a strong and rapidly growing foothold in these economies, meaning the choice of a new phone for consumers won’t depend so much on merchant acceptance. Rather more weight will go to brand and usability, which is where Apple tends to dominate. This could mean Samsung loses the critical first mover advantage in these markets.
Finally, from a form factor angle, the LoopPay technology today requires a MST enabled phone cover to be attached to the device and has no fingerprint recognition either. Samsung might shake this up and embed the technology in the phone itself but if they don’t then in its current form, a LoopPay-Samsung mash up makes for a bulkier, less streamlined experience compared to Apple.
Overall, it’s hard to go past the pure level of acceptance Samsung will have off the bat. Suprisingly enough though, what neither Apple or Samsung are revolutionising is this somewhat outdated requirement that a customer needs to position themselves near to an eftpos device to complete a payment. From a retailers perspective, it’s this exact bottle neck at the counter that is behind busy trading period walk outs and churn. Enter stage left longstanding ecommerce payment giant PayPal, who believe they may have the solution to this one. Look forward to sharing this emerging technology with you tomorrow.