Mobile Payments, the Second Act

Observers of the payments scene could be forgiven if they thought Apple Pay was the sum and substance of mobile wallets. Apple Inc.’s canny recruitment of major issuers and its deft marketing to consumers could lead anyone to believe that. But all the while, some big-time rivals have been lurking in the background. And late this summer and early fall, a couple of them have begun to stir.

One case in point is Samsung Electronics Co. Ltd. The Korean electronics giant last month said its Samsung Pay mobile-payment service, which uses near-field communication and a radio-frequency version of magnetic-stripe data, would debut commercially in the United States on Sept. 28. Some consumers with Samsung smart-phone and tablet models were set to participate in a test scheduled to start Aug. 25.

Announced in March following Samsung’s acquisition of Boston-based LoopPay Inc., developer of the magnetic-stripe radio-field technology, Samsung Pay aims to put the handset maker in direct competition with Apple Pay, PayPal Holdings Inc., and expected offerings from Google Inc. and the Merchant Customer Exchange. MCX is the developer of the merchant-controlled CurrentC wallet, about which more a little later. Google’s Android Pay could arrive this year, and the CurrentC wallet is expected to begin broader testing this month.

In-store mobile payments have been buoyed by last fall’s introduction of Apple Pay, with one forecast now predicting Apple Pay transactions will top $22.4 billion in 2016. In its battle to claim some of this market for itself, Samsung hopes the inclusion of magnetic-stripe radio-field technology, which it labels Magnetic Secure Transmission, will give it an edge.

MST technology enables consumers to make contactless payments by wirelessly transmitting card data to the point-of-sale terminal. The signal emulates the magnetic-field change that occurs when a mag-stripe card is passed through a reader. That means Samsung Pay can be used at most locations that accept mag-stripe cards.

“We are partnering with card networks, issuers, and acquirers, and Samsung Pay will also be the first to support contactless payment for store-branded credit cards,” InJong Rhee, Samsung Electronics executive vice president and global head of Samsung Pay, said in a press release last month, echoing Apple Pay’s strategy. “The list of partners will only grow.”

Among early backers are private-label card issuer Synchrony Financial, U.S. Bank, JPMorgan Chase & Co., First Data Corp., Total System Services Inc. (TSYS), and Bank of America Corp., along with Visa Inc., MasterCard Inc., Discover Financial Services, and American Express Co.

Samsung Pay will be preloaded on select Galaxy S6 edge+ devices and Galaxy Note5 devices, with a free software upgrade available in mid-August to enable Samsung Pay on Galaxy S6 and S6 edge devices.

For its part, MCX isn’t staging a full-blown rollout of CurrentC, but it is conducting a pilot. That may not seem likc much of a debut. But after months of seeming inaction, it’s a major step forward for the company, which is backed by some of the nation’s biggest retail companies, including Wal-Mart Stores Inc. Target Corp., and Best Buy Co. Inc.

The pilot was set to begin late last month in Columbus, Ohio. Few details are known, as MCX was staying mum about it before its launch. According to a CurrentC Web site, the wallet will eschew general-purpose bank cards, at least in the early going, in keeping with the MCX merchants’ aversion to card fees. Instead, consumers are being invited to load their bank-account data for automated clearing house transfers. In addition, they can load the Target REDcard credit, debit, or gift card.

Instead of NFC or MST, the wallet connects to merchant terminals via a barcode technology developed by Paydiant Inc., a startup that was acquired this spring by none other than PayPal.

—Kevin Woodward and John Stewart