Samsung Pay to enter new markets in 2016

Wednesday 2 March 2016 | 16:47 CET | Background

At the Mobile World Congress in Barcelona, Samsung announced that m-payment service Samsung Pay will be launched in more markets, including the UK and Spain. The service is available on the new Galaxy S7 and S7 Edge handsets as well as several older models. Samsung will market the service with a combination of convenience, safety and the largest acceptance of any services around the world. Samsung Pay should be launched in four to seven European markets in the nex year.

Samsung Pay is live in the USA and South Korea, with over 5 million registered users. Mainland China is set to follow in March. Australia, Brazil, Canada, Singapore, Spain and the UK have been confirmed, although there is no specific timeframe. Following on the S7, more handsets will be equipped with the necessary hardware and software for Samsung Pay, such as the 2016 versions of the A5 and A7. On the Note 5 and S6 models, the service is already available.

Samsung is in advanced preparations, but that could still mean that a launch is weeks to months away, according to Billy Wright, Samsung senior adviser for m-commerce. Samsung Pay is expected to launch with support from major card networks and a large number of banks.

In one year, Samsung wants to enter four to seven European countries. While the UK and Spain are confirmed, Wright declines to name the other countries. Potential markets should have a good adoption rate for NFC retail payments. France is in that group, as well as Hungary, Poland, the Czech Republic, Slovakia and Slovenia.

Convenience as key differentiatior

Samsung says ease-of-use is a key differentiator for their solution. For Samsung Pay, they have clearly tried to make the user experience as simple as possible. A swipe up from the bottom of the screen opens up the payment app, even when the phone is sleeping, screen off. Once the app is running, all available cards are shown.

New cards can be added by taking a picture. The Samsung Pay application will then attempt to validate the card on a payment network. Credit cards/debit cards can be added, as well as loyalty cards and other cards, such as a pass for a business or sports club. Samsung argues that savings programs are included automatically.

A payment is always confirmed by a scan of the fingerprint. Payments to the standard limit of GBP 30 pounds sterling or EUR 25 require no PIN.

As with Apple Pay, banks may also allow larger payments be confirmed without PIN. That is not yet a standard feature, but Wright expects rapid progress in this, because a payment with Samsung Pay has a low risk profile.

Magnetic technology as advantage

Wright sees Samsungs MST (Magnetic Secure transmission) technology as a unique advantage. The phone also includes a tiny magnetic coil which generates the magnetic field of a conventional mag stripe card.

At a cash register, NFC and MST work in the same way, but MST will also work on legacy terminals that are not NFC-ready. Samsung points to the fact that an MST transaction is tokenized in the same way as an NFC transaction: no card credentials are shared, only a dynamic data cryptogram (token).

Swiping the card however has disappeared in Europe. In the US it is still very common, while transition to EMV chip is in progress. Samsung emphasizes that their combination is best accepted worldwide. Chip and magnetic strip converge to 85 percent of all stores worldwide.

It is not sure if Samsung Pay will launch in the Netherlands. When it does launch however, MST will be banned. The transition to EMV has been completed and therefore, the magnetic stripe technology is considered less safe. It will not be reactivated a Visa spokesman says when asked for comment.

He points to another problem. Dutch debit cards do not show a standard PAN (Primary Account Number) and therefore Samsung is unable to simply scan the card for activation. It would need access to a register to convert the IBAN number to the underlying number.

Growing number of mobile wallets

In any market Samsung enters, it will face increasing competition in the mobile wallet space. The arrival of competing methods lowers the threshold for banks to develop services themselves on smartphones.

For over than a year the HCE technology for NFC payments is a standard feature in Android handsets. Several banks have launched their own mobile payment service, built on HCE, while others have signed an agreement with a mobile operator to use the SIM card as a the enabling technology.

Wright expects growth in the number of products and wallets, followed by consolidation. He says that Samsung Pay will prevail, due to the combination of usability, MST for non-bank cards and the securite mobile platform, Samsung Knox.

"HCE is avalaible too, but we don’t see that banks hold off Samsung Pay, on the contrary." He argues that it is attractive for financial services providers to cooperate with smartphone manufacturers. In many markets, Samsung and Apple together control 85 percent of the mid to high end market. That's enough, he says, because the service was never intended for low-end smartphones.

Samsung Pay should also increase brand loyalty, with buyers choosing another Samsung to replace their old phone. The mobile wallet will therefore continue to be called Samsung Pay.

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