Samsung Pay set to lead mobile payment industry

By Lee Min-hyung

Samsung Electronics’ mobile payment system Samsung Pay is expected to dominate the mobile payment market because the system is the most compatible with merchants’ terminals, analysts said Monday.

They said the key to leading the nascent mobile payment market lay in how to guarantee “wider usage,” and said Samsung’s use of magnetic secure transmission (MST) technology would give the company a significant advantage over its two main rivals, Apple Pay and Android Pay.

MST enables users to make payments in places where traditional magnetic-strip credit cards are accepted. Samsung’s two main rivals have yet to use the technology.

“Last year, Samsung acquired U.S.-based MST technology developer LoopPay in an attempt to give Samsung Pay wider use for people’s daily lives,” said Kiwoom Securities analyst Matthew Han.

This would give Samsung momentum against Apple Pay and Android Pay, both of which used near field communication (NFC) technology, which is not widely used in everyday life, he said.

“The penetration rate for the NFC technology is very low around the world including the United States,” he said.

“Samsung’s acquisition of LoopPay was the first step for the company to lead the smart payment industry.”

Only 18.2 percent of the 1.5 billion mobile phones around the world had NFC technology in 2013, according to U.S.-based market researcher IHS Technology.

“Security is another key issue determining the success or failure of mobile payment business,” Han said. “Samsung Pay uses tokens and fingerprints to guarantee the same level of security as its rivals.”

NH Investment and Securities analyst Lee Sei-cheol, said Samsung Pay was expected to see growth after strengthening its partnership with China’s largest card company, China UnionPay.

UnionPay cards are accepted in about 150 countries, and an accumulated five billion cards have been issued across the globe.

“Samsung Pay offers more comprehensive options by using both NFC and MST technology,” Lee said. “On top of that, expectations are that Samsung will see huge synergy with the Chinese card giant to dominate the nascent mobile payment industry.”

He said the partnership would also help Samsung consolidate its position as the leading Android-based smartphone maker.