Digital Transactions Authoritative, insightful and timely information for payments professionals
By Jim Daly
@DTPaymentNews
As mobile wallets rapidly evolve, Samsung Electronics Co. Ltd. late Tuesday put out a birthday card of sorts reminding the world that its Samsung Pay service is now a year old in the United States. In that time, Samsung Pay has added payment-card issuing partners, but the wallet’s biggest initial differentiator, its magnetic secure transmission (MST) technology that enables Samsung Pay to work with magnetic-stripe terminals, is declining in importance, a close observer of the mobile-payments scene notes.
In a news release announcing the anniversary, South Korea-based Samsung, the world’s biggest smart-phone manufacturer, said Samsung Pay is working with digital-coupon provider Quotient Technology Inc., formerly Coupons.com Inc., to enable Samsung Pay users to search for, save, and redeem electronic coupons from Quotient’s retailer partners directly within the app.
“Samsung Pay continues to add features and services to make it a holistic digital wallet that extends beyond debit and credit cards,” Samsung said.
Even before the Quotient announcement, loyalty services were one of Samsung Pay’s strong suits, says Aaron McPherson, an independent payments analyst based in the Boston area. He recounts dining with a friend at a Pizzeria Uno a couple of months ago, where the friend seamlessly redeemed the restaurant’s electronic coupon linked to Samsung Pay and paid with a Samsung phone via a kiosk at the table. “That is exactly the sort of thing that is needed to get consumers to try the wallet and start building habits,” McPherson tells Digital Transactions News via email.
Researchers say that despite all the attention toward mobile wallets, consumer reaction so far has been tepid. Strengthening the links between merchants’ loyalty programs and mobile payments is seen as one way to boost wallet usage.
While Pizzeria Uno with its kiosks may not be representative of all merchants that accept mobile payments, McPherson says the Samsung Pay experience “was the first sign I’ve seen of a mobile wallet driving traffic through offers. Their partnership with Quotient is another positive development.”
Samsung Pay works on a variety of Samsung mobile devices equipped with near-field communication (NFC) contactless technology. Samsung said it launched in the United States with just four payment card issuers as partners whose cards could be loaded into its mobile wallet. Now more than 500 banks representing 80% of U.S. credit and debit cards work with Samsung Pay, the company says.
Despite that big growth, Samsung Pay is “still substantially behind [Apple Inc.’s] Apple Pay in the number of card issuers they have signed up,” says McPherson.
In addition, MST technology, which Samsung acquired when it bought LoopPay Inc. in 2015, is becoming less valuable for payments as the U.S. converts to EMV chip cards, according to McPherson. MST sends a signal that exploits the same magnetic field at a point-of-sale device that any mag-stripe card uses, essentially emulating the card. That was a big advantage when EMV cards and terminals were rare. But since the card networks’ October 2015 POS liability shifts, payment cards with EMV chips, as well as EMV readers, have become much more common. Those new terminals will reject a card-based mag-stripe transaction if the chip is available, and in a mobile payment, the transaction will rely on NFC and tokenization.
“There’s no question that the advent of EMV dramatically reduced the value of MST, because it took away the ability they used to have of reading any card’s mag stripe and emulating it at the point of sale,” McPherson says. “We saw this coming back when LoopPay was independent.”
MST will continue to work with mag-stripe-based loyalty and gift cards, he says. “I think it is a problem that for some applications the consumer will need to tap for NFC and for others they will need to hold the phone over the mag-stripe reader.”
Samsung Pay’s mag-stripe issues aside, “overall it looks like they are moving in the right direction, and I hope they will continue to push on loyalty and rewards and offers,” says McPherson. “That is the key to changing consumer behavior.”
As part of the anniversary, Samsung said it is offering Samsung Pay users $100,000 in prizes, including 365 Samsung Gear S2 smart watches. Those devices have NFC and can perform contactless payment transactions.
