On Thursday morning Samsung (SSNLF) unveiled its new mobile payment platform Samsung Pay, alongside two new smartphones. The service will make its U.S. debut later this month as a small beta, with a full launch to follow on September 28. At launch, the service will only be available on the company’s Galaxy S6, S6 Edge, Note 5, and S6 Edge+ due to hardware requirements.
What sets Samsung Pay apart from its competitors?
Unlike other mobile payment services, Samsung Pay uses a combination of two wireless technologies to offer better payment options.
First is near field communication (NFC) capabilities, which is the same wireless technology competing services use to transmit payment information to point of sale (POS) stations. You’ve likely seen the blue NFC terminals at CVS or Walgreen’s, just above credit card terminals.
The second is a new technology, which the company acquired from LoopPay, called “magnetic secure transmission” (MST). Essentially, Samsung smartphones using the technology will create a small magnetic field (capable of traveling only a couple of inches), which is readable by any standard credit or debit card terminal. This new piece of technology means mobile payments will work with payment terminals already installed in any store regardless of size.
By using two different types of pay technologies Samsung offers consumers more pay options, unlike its competitors (such as Apple Pay) which require NFC for transactions. NFC payments require a special type of hardware be installed inside retail stores for it to work which, in turn, slows down its adoption and leads to some of the problems Apple Pay experienced this year. To its credit, the company said it expects Apple Pay to be accepted in 1.5 million locations in the U.S. by the end of the year, whereas thanks to Samsung’s MST integration its service will be compatible with 95% of merchants on day one according to the company. (ATM’s and gas pumps need not apply.)
The best part of Samsung Pay is that users won’t have to know (or care) about what type of terminal a merchant has in order for the service to work. Simply placing your smartphone on terminal is enough to have your payment processed.
Paying with Samsung Pay
The Samsung Pay payment process is pretty straightforward: You simply swipe up from the bottom of a compatible smartphone’s screen to start. A default credit or debit card will pop up, and with a swipe to the left or right you can then start browsing through your many card options. Afterwards users can simply place their phone next to a payment terminal, approve the purchase via the phone’s fingerprint reader at the bottom of the device and Samsung Pay will automatically transmit payment information, either to a standard credit card terminal or NFC station.
During a briefing earlier this month, Samsung demonstrated the service on a payment terminal that lacked NFC capabilities. The app and service seemed to work as advertised, but it’s hard to infer what the real-world experience will be like. Samsung plans on doing limited merchant outreach to educate retailers about the service, which leaves the bulk of education to be done by users.
So far, so good
Over the past month, Samsung has conducted trials for its new payment service in South Korea. During the trial the company provided users with no instructions on how to use the service, nor did it identify which merchants the service would work at. Ultimately, the feedback from merchants and participants has been positive, although there’s been some hesitation on both sides of the payment kiosk due unfamiliarity with the technology.
After a month of use, 40% of a users transaction volume went through Samsung Pay. This means for every 4 out of 10 transactions users relied on Samsung Pay instead of the average credit card. Apple has yet to release any official usage numbers for Apple Pay, although third-party merchants have provided some insight surrounding its use.
Going beyond credit and debit cards
For the first few months after its launch, Samsung plans to focus most of its energy on improving and maintaining the payment portion of the service, but future updates—that could include membership perks and loyalty cards—are in the works.
Furthermore, Samsung plans to eventually allow vendors to send balance alerts, coupons, account updates, and rewards to users’ devices, which is how the company plans to monetize the service in the long-term.
Samsung will release a free software update for older models—Galaxy S6 and S6 Edge—mid-August that will allow users to use the service when it launches later this year. Meanwhile, select customers will receive an invite to take part in the Pay beta program.