With a Choice, Will Samsung Smart-Phone Owners Choose Samsung Pay?

Samsung Electronics America Inc.’s launch today of Samsung Pay, a mobile-payments service exclusive to its smart phones, could pose a quandary for consumers over whether they should choose Samsung Pay or Android Pay, Google Inc.’s mobile-payment service that wireless operators are loading onto the Android phones they sell. Samsung smart phones use the Android operating system.

Both Samsung Pay and Android Pay have to contend with Apple Inc.’s Apple Pay, which launched more than a year ago.

“It will be confusing,” says Thad Peterson, senior analyst at Aite Group LLC, a Boston-based payments advisory firm. “What I don’t know yet is how Android Pay is being positioned with Verizon, AT&T, and T-Mobile.” These three wireless operators agreed to load Android Pay following Google’s February acquisition of Softcard, a mobile-payments and offers service started by the three carriers.

Presumably, Peterson says, loading Android Pay onto Android devices also includes Samsung smart phones, placing Android Pay in a dominant position. “This can’t be good for Samsung and could be confusing for consumers.” Of the three carriers, only Verizon is not supporting Samsung Pay as fully as the other two carriers. Android Pay is preloaded onto all T-Mobile NFC-enabled Android devices it sells, including Samsung handsets, a T-Mobile spokesman says. AT&T says Android Pay is loaded onto eligible Android phones. Verizon did not respond to a Digital Transactions News inquiry.

Any disadvantage in the hotly competitive mobile-payments arena is critical. Samsung touts Samsung Pay’s ability to be used at point-of-sale terminals that have near-field communication (NFC) or magnetic-stripe card acceptance. Samsung Pay uses technology it calls Magnetic Secure Transmission, a radio-field technology that lets Samsung Pay interact with ordinary mag-stripe payment terminals, which Samsung is counting on to give its payments service access to anywhere from 80% to 90% of existing POS terminals. MST relies on an embedded metal coil that ordinarily allows the phone to recharge its battery wirelessly. Other Android handsets and Apple’s iPhones lack this technology, though they, too, use NFC.

Samsung Pay users swipe up on the screen, scan their fingerprint, and pay. Samsung Pay launched in South Korea in August, where transaction volume topped $30 million in its first month of availability, Samsung says.

But Android Pay’s integration into the operating system gives it a step up on Samsung Pay, Peterson says. “Going forward, the key to achieving critical mass in the mobile-wallet space will be linkage to the operating system,” he says, “as that will enable easy integration into native apps and the ability for quick and efficient upgrades. Android Pay will have a distinct advantage over Samsung in this situation.”

Samsung Pay, which is only available on Samsung’s newest devices—Galaxy S6, S6 Edge, Note5, and S6 Edge+—currently works only with credit or debit cards bearing the America Express Co., MasterCard Inc., or Visa Inc. brands that have been issued by Bank of America Corp., Citibank, AmEx, U.S. Bank, or Synchrony Financial, a store-branded credit card issuer. Android Pay, in addition to the three other card brands, also supports Discover and six additional issuers.

The front runner, however, appears to be Apple Pay, which supports the four major payment brands on cards issued by more than 500 banks. Apple Pay launched a year ago.

Consumer experience will dictate how Android Pay and Samsung Pay will fare on Android smart phones, Peterson says. “Consumers will adopt what’s easiest over what’s best,” he says, “and Android Pay on Android devices will be an easy and fairly frictionless solution. I don’t think consumers will use both wallets any more than we carry more than one physical wallet. It just adds complexity and hassle.”

In related news, payment processors First Data Corp., Global Payments Inc., and Total System Services Inc. (TSYS) reported that they also support Samsung Pay.