Digital Transactions Authoritative, insightful and timely information for payments professionals
By John Stewart
@DTPaymentNews
Mobile-payments services have plenty of issues with adoption and usage, but battery fires aren’t likely to be among them. While it’s true that a consumer can’t use a mobile wallet if he’s afraid his smart phone will ignite, payments experts say the problem that developed last week with fires caused by battery cells in Samsung Electronics Co. Ltd.’s new Galaxy Note 7 phablet will have little effect on uptake of Samsung Pay, the company’s 1-year-old mobile wallet.
Samsung estimates it has shipped 2.5 million of the phones, which go for about $800 in the United States, since launching the device last month. About 24 phones per 1 million are suspect, according to a Samsung official contacted by The Wall Street Journal. The problem became widely known when users reported on social-media sites that their phones had caught fire or exploded while being charged.
Samsung is offering free replacements of millions of Galaxy Note 7s in what the Journal calls one of the biggest smart-phone recalls to date. The news comes, however, at a bad time for Samsung, as rival smart-phone maker Apple Inc. is expected Wednesday to unveil its latest iPhone model.
But while the fear factor might put off some Samsung enthusiasts, the problem is likely to be limited and short-lived and won’t have much impact on Samsung Pay. “People are pretty dependent on their phone. I’d expect they’d get a replacement pretty quick,” notes Aaron McPherson, an independent payments analyst who follows mobile commerce. Besides, he points out, the Note 7 is “just one device among many that support Samsung Pay.”
Some nine Samsung smart-phone models work with the wallet. In research now under way, preliminary results indicate about 5% of owners of these models have a Note 7, says Marianne Berry, managing director of Auriemma Consulting Group’s Payment Insights practice. That’s a relatively small number, but Berry says 58% of Note 7 owners are Samsung Pay users.
James Wester, research director for global payments at IDC Financial Insights, jokes that the most likely result of the Note 7 problem is that “it will stop me from storing it in my pocket.” Otherwise, he adds, “I don’t see [the battery fires] having a huge bearing on Samsung Pay. We’re still dealing with the early adopters. I don’t think this is going to put them off. If it were a hack or a security issue, it might.”
Will Graylin, global co-general manager for Samsung Pay, was not available for comment.
Samsung Pay has enjoyed widespread recognition among U.S. cardholders relative to at least some competing wallets. According to research by Phoenix Marketing International, some 57% of cardholders recognized it in March, compared to 49% for Android Pay, which was launched by Alphabet Inc. at the same time as Samsung Pay. Some 12% had already loaded a credit or debit card into Samsung Pay and 11% had used the wallet for an in-store or in-app transaction, comparable to Apple Pay’s position after its first six months.
Still, with few exceptions, digital wallets issued by financial institutions, merchants, mobile-network operators, and third party technology companies have struggled with a wide range of issues, including inconsistent user experience, absence of incentives, scarcity of acceptance locations, concerns about security, and a transaction process that isn’t markedly better than using a card.
Among all of these factors, some 61% cited the last one as the single most important reason wallets have struggled to win adoption and usage, as reflected in a Digital Transactions News Question of the Week Poll last month. Coming in second, at 25% was “not enough places accept them.” Battery fires weren’t contemplated.
In other digital-wallet news, MasterCard Inc. announced Wednesday that its Masterpass wallet now offers quick-response code capability for in-store and online acceptance. Masterpass QR was introduced last month in Pakistan, with more launches planned in coming months for the Middle East and Africa.
All told, 6 million merchant locations in 77 countries now accept Masterpass with contactless point-of-sale readers, MasterCard says, though the capability is restricted to Android users. “Hundreds of thousands of merchants” accept Masterpass online or in-app, MasterCard says. MasterCard in July announced a major revamp of its 3-year-old digital-wallet service.
Also, in advance of Apple’s iPhone announcement Wednesday, online home-furnishings retailer Wayfair LLC announced it will accept Apple Pay on the Web with iOS 10 on Apple’s Safari browser with the iPhone, iPad, and Mac. Boston-based Wayfair offers a catalog of more than 7 million products. Apple announced earlier this year that it would make Apple Pay available online through Safari.
