Samsung’s acquisition of LoopPay, marking the South Korean giant’s aggressive entry into the mobile payments market, poses more challenges to Google than Apple, argues Gilles Ubaghs, an Ovum senior analyst covering financial services technology.
Since being set up in 2012, US-based LoopPay has risen quickly following a Kickstarter crowdfunding campaign in 2013. The high levels of attention paid to LoopPay stem from its proprietary magnetic secure transmission (MST) technology, which means a mobile proximity wallet rollout is not dependent on wider contactless infrastructure deployment, such as NFC, notes Ubaghs.
Despite this novel approach to a key stumbling block to widespread mobile proximity payments adoption, he said LoopPay faces significant hurdles. Perhaps most critically, due to its reliance on magnetic stripe technology, LoopPay is very US-centric and holds less potential benefits in markets such as Canada, the UK and Australia, where contactless infrastructure is significantly higher than the US, and rising.
“In markets that use EMV and have a high contactless penetration rate, the benefit of using LoopPay is less clear,” he argues.
Although many see LoopPay as a direct competitor to Apple Pay, and undoubtedly Apple’s payment service was a key driver in this move, Ubaghs said the acquisition likely says more about Samsung’s relationship with Google and the Google Wallet platform.
“Mobile payments are not yet a driver of handset sales and very few people will be basing their phone purchasing decisions on mobile payment functionality. As long as it remains a ‘nice to have’ not a ‘must have’ feature, the Apple Pay and LoopPay ecosystems will largely be mutually exclusive.”
LoopPay does represent, he said, a more direct threat to Google Wallet, which makes heavy use of the NFC capabilities of many Samsung devices. It remains unclear how Samsung will balance its introduction of LoopPay into its NFC-enabled handsets running on Android.
This week, Google took over rival US payments rival Softcard, which is backed by AT&T, Verizon Wireless and T-Mobile US. As part of the deal, the Google Wallet app will come pre-installed on Android handsets (KitKat and later) sold by the three operators. The arrangement, which starts later this year, further complicates the situation.
A similar point to Ubaghs is made by Richard Windsor in a Radio Free Mobile blog entitled “Mobile payments could cause the gorillas to start fighting again”.
Google must put the two technologies [Wallet and Softcard] together and “come up with a seamless, easy and fun to use solution that users will love”, which will take some time, points out Windsor.
Ubaghs is clear that another potentially major player is making a forceful entry into the mobile proximity payment market. “There remain many unanswered questions, not least of which includes potential revenue models, security and compatibility issues and rollout strategy to global markets outside the US, but with Samsung’s considerable resources these developments will be difficult for competitors to ignore.”
For the moment, Windsor says Samsung has the lead. But this promises to be a long campaign between the two giants of the industry.