Samsung’s acquisition of US mobile payments start-up LoopPay signifies an intensification of the rush to mobile payments development in the wake of Apple Pay’s launch.
Since being established in 2012, LoopPay has risen quickly from a Kickstarter crowdfunding campaign in 2013, through to an acquisition by technology giant Samsung in 2015. The high levels of attention being paid to LoopPay stem from its proprietary Magnetic Secure Transmission (MST) technology. As a result, a mobile proximity wallet rollout need not be dependent on wider contactless infrastructure development.
Despite this novel solution to a key stumbling block to widespread mobile proximity payments adoption, LoopPay faces significant hurdles. Perhaps most critically, due to its reliance on mag stripe technology, LoopPay remains highly US centric, and holds less potential benefits in markets such as Canada, the UK and Australia, where contactless infrastructure is significantly higher than the US and rising. In markets that use EMV and have a high contactless penetration rate the benefit of using LoopPay is less clear.
Although many perceive LoopPay as a direct competitor to Apple Pay, and undoubtedly Apple’s payment service was a key driver in this move, Samsungs acquisition of LoopPay likely says more about its relationship with Google and the Google Wallet platform. Mobile payments are not yet a driver of handset sales and very few people will be basing their phone purchasing decisions on mobile payment functionality. As long as it remains a ‘nice to have’ not a ‘must have’ feature the Apple Pay and LoopPay ecosystems will largely be mutually exclusive. LoopPay does however represent a more direct threat to Google Wallet which already makes heavy use of the NFC capabilities of many Samsung devices. It remains unclear how Samsung will balance its introduction of LoopPay into its NFC enabled handsets running Android software.
At this stage following Samsung’s acquisition of LoopPay it is clear that another potentially major player is now making a more forceful entry into the mobile proximity payment market. There remain many unanswered questions, not least of which includes potential revenue models, security and compatibility issues and roll out strategy to global markets outside the US, but with Samsung’s considerable resources these developments will be difficult for competitors to ignore. This will likely only further increase the speed of development now occurring in the broader mobile payments space.
Gilles Ubaghs is a Senior Analyst, Financial Services Technology at Ovum. For more information, visit www.ovum.com/