Julie’s gadget diary – Should Apple be worried that Samsung Pay will win the mobile payment wars?

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Yesterday’s Samsung Unpacked event left me feeling disappointed about their new hardware announcements. However, their Samsung Pay announcement caught my attention. If you aren’t familiar with Samsung Pay, it’s Samsung’s mobile payment application. Like Apple Pay, Google Wallet, Android Pay (not available yet) and CurrentC (also not available yet), it’s a way to use your phone to pay for products at brick and mortar stores without using your physical plastic credit cards. You can just walk up to the cash register with your items and tap your phone on a compatible card terminal to pay for them. These apps effectively allow you to leave your wallet at home.

So far the biggest problems with these mobile payment applications are worrying about which stores they will work in and which banks and credit cards you can use them with. For example, if you shop at Walmart, Target or Kohl’s (see update below) you won’t be able to use Apple Pay. You’ll have to use CurrentC. At least until Walmart, Target and Kohl’s, who are members of the Merchant Customer Exchange who created CurrentC, cave in and allow other payment apps to work at their stores in addition to CurrentC. CVS and Best Buy are two such companies that have done that or will be doing that soon.

Where things get interesting, is that Samsung Pay will work at almost every store that has an existing credit card swipe machine at the checkout line. This includes Walmart. With Samsung Pay, you don’t have to look for the little NFC payment icon or wonder if your phone is compatible. The new Samsung Galaxy S6 Edge+ and Note 5 devices that were announced today have a special magnetic transmitter called MST (Magnetic Secure Transmission) that sends the same info to the credit card terminal that is received when you swipe your plastic credit card. With a software update, last year’s S6 and S6 Edge will also be able to take advantage of Samsung Pay. Samsung Pay will work with NFC sensors as well, so it appears to be slated as a solution for almost every store out there. Note that it won’t work with ATMs, gas pumps or other kiosks that require a physical trigger to activate the transaction.

Now those new Samsung devices are starting to look more desirable to me because I’d love to no longer need to carry a wallet when I’m shopping. Samsung Pay will be available here in the US on September 28th and is launching next week in Korea. It will work with your American Express, Visa, Mastercard, USBank and Bank of America cards. For more info visit Samsung.

Update: Target and Kohl’s have already announced that they are going to accept Apple Pay in their stores. It looks like Walmart is still the biggest holdout (for now).

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12 thoughts on “Julie’s gadget diary – Should Apple be worried that Samsung Pay will win the mobile payment wars?”

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  2. Does this mean you will be rescinding your article about switching?

    I didn’t see the event, but just looked it up. That looks interesting. I’m curious how well it works. I would not mind dropping half the content of my wallet. I carry……Drivers License, Green Card, 2 Medical Cards for me, 2 for my son, 6 Credit cards (I’m a point freak similar to extreme couponing, and 2 Debit cards. Plus all the the other crap that men stick in their wallet. So if I could cut out 6 or more then them my posterior will be happy.

    1. No, I’m not rescinding my article about switching. I still want to see if I can switch and be happy. My plan is to hopefully get an iPhone 6s or 6s Plus for review through Verizon. That will let me see if I want to spend my own money on one. I’m already on the Verizon review list for the Note 5 (although I probably won’t get to use it long enough to test out the Samsung Pay if they send it right away).

  3. No, they shouldn’t be worried.

    1. MST (which Samsung acquired from the purchase of LoopPay) is no more secure than using a normal magnetic swipe card. The actual credit card number is stored on your device (in what is claimed to be a secure element), but once it get to the POS system, the retailer has it. All of the risks of having your card data stolen from the retailer (such as in the Target and Home Depot breaches of the past few years) are also present with MST. Apple Pay, conversely, adds multiple layers of security, and keeps the actual credit card number out of the hands of the retailer entirely. For anyone concerned with the security of their credit card data, Samsung Pay presents no improvements over Apple Pay.

    2. MST will not be relevant for long. Any retailer that doesn’t want to get hit with lawsuits and bad press from card data breaches will be shutting down their magnetic card readers and relying on EMV and/or NFC next year. By the end of 2015, most banks will have replaced credit and debit cards with transitional cards that have both magnetic stripe and EMV, to account for retailers that are slow to adopt EMV. By the end of 2016, you’ll be hard-pressed to find a retailer that still has operating magnetic stripe readers. So MST might be relevant for as much as 18 months or so on the outside, probably far less than that, realistically.

    3. Samsung Pay is Samsung-only. The statistics show that the majority of mobile users stick with their chosen platform when they upgrade (though Android tends to show a higher rate of attrition). This is good news for Apple, since they are the only supplier of iOS devices, but it’s a mixed bag for Android device makers. Even users loyal to the Android platform can relatively freely move around between vendors. There are retail studies showing that only about half of Samsung phone users move to another Samsung phone when they upgrade, whereas over three quarters of iOS users upgrade to a new iPhone. As a result, the pool of Samsung Pay users is far more volatile — there’s a 50/50 chance that anyone using Samsung Pay will be on a non-Samsung device (and therefore, no longer a Samsung Pay user) in a year.

    4. Samsung Pay doesn’t work on rooted phones. Let’s be honest, Android power users — who are also usually the ones who buy the flagship phones — are all about rooting their devices so that they can tweak them to their hearts’ content. The ability to customize via rooting is one of the things that Android fans love to bring up as a benefit of Android over iOS. Well, the official word is that Samsung Pay will not work on a rooted phone. So what’s a power user to do?

    I’m not saying that Samsung Pay will fail. There’s plenty of room for multiple players in the realm of mobile payments, and more competition is better. But there’s exactly zero chance that Samsung Pay is going to be an obstacle that Apple Pay has to overcome. If anything, Apple Pay’s biggest obstacle is that people still don’t know about it.

    1. Thank you Andy, this is some great info! Among other things, I didn’t realize that Samsung Pay would not work with rooted phones.

      The main reason why the Samsung Pay announcement interests me is because I do the bulk of my shopping (groceries, supplies, etc) at Walmart. And as we know, Walmart is part of the group that created their own mobile payment solution – CurrentC that isn’t even available yet. I don’t think that the Samsung Pay feature is enough to make me want to upgrade to an S6, S6 Edge+ or the new Note 5, but I sure would love to be able to ditch my wallet!

      1. Just realized that “Maybe you should do the research to see if you were wrong about…” sounds a little dick-ish, which is not what was intended. Let me rephrase: “Since this data in the article seems to be incorrect or out of date, I’d be interested to know if the other retailers you mention have also made any noises about capitulating.”

        Much better. 🙂

        1. No worries. The article where I got some of my info was from just a day or so ago but now I’m seeing that it was out of date. Kohl’s is also going to accept Apple Pay. I supposed the biggest hold out is Walmart (for now).

          Time to update the article with this info…

  4. Samsung Pay relies on a technology (mag-swipe) that’s in the process of being replaced in the United States (and is dead in the rest of the G20)? Nope, I don’t think Apple has anything to worry about.

  5. It’s well documented that Apple users spend a lot more money online and directly than Android users (if one aggregates all of the Android derivative phones together). And in this case that’s not a valid audience considering Samsung Pay (gee, wonder how they thought of that name) is high-end Samsung devices only.

    And frankly who in their right mind would trust Samsung (and by extension Android devices) with their credit card information?

  6. Obviously not. iPhone users can’t use Samsung Pay, and Apple Pay doesn’t work on non-iPhones, so never shall the twain meet. Now, if mobile payments were a huge differentiator that would convince people to switch platforms, you may be right, but the phone makers leapfrog one another, no feature remains exclusive very long and there is hardly any feature left compelling enough to make people switch.

    The real question is whether Samsung Pay will supplant Android Pay. Given it’s a Samsung-only solution, and that Samsung has not proven this far that it excels at cloud services unlike Google, that’s unlikely.

  7. As I watched the live stream, I kept telling myself maybe Apple will surprise me again. Maybe there will be “one more thing” to wow me. Maybe… But there wasn’t and it made me sad.

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