Last fall, Apple launched Apple Pay, bringing mobile-payment technology to the iPhone. Samsung now wants to get that on Android phones – at least the ones it makes.
The Galaxy S6 and S6 Edge phones announced Sunday will come with mobile-pay capabilities. Samsung’s payment service won’t come until this summer, and will launch only in the U.S. and South Korea at first. Here’s what’s known about Samsung Pay and how it compares with Apple Pay and Google’s own efforts for Android.
How does Samsung Pay work?
As with Apple Pay, customers will simply tap their phone on a retail store’s payment machine. Apple and Samsung phones use a wireless technology known as near-field communication, or NFC. The payment machine also needs NFC, something many merchants won’t have until this fall.
Samsung is supplementing NFC with a technology from LoopPay, a startup it’s buying. LoopPay replicates the magnetic-strip signals on plastic cards, so it works with more merchants. While NFC transactions can be authorized through the phones’ fingerprint sensors, LoopPay transactions might still require a physical signature.
If there’s LoopPay, why bother with NFC and the equipment that entails?
As a retrofit for older, magnetic technology, LoopPay has its limitations. Some parking meters and transit-fare machines require you to insert a card into a slot. You can’t just stick a phone with LoopPay into that slot. At some stores, the place for swiping the card is behind the counter – out of the customer’s reach.
LoopPay is meant as a transition. Bill Gajda, a senior vice president at Visa, says LoopPay will help get customers more comfortable with mobile payments, as more merchants will accept them. As merchants see customers make such payments, they would be more likely to upgrade equipment to NFC.
How secure is Samsung Pay?
Samsung Pay, like Apple Pay, promises to be more secure than plastic. With both services, the merchant gets a substitute 16-digit card number stored on the device. A verification code is created for each transaction, based in part on unique keys on the phone. Even if hackers get that substitute number, they need the actual phone for the verification code.
That said, LoopPay’s stand-alone technology uses the regular card number, and magnetic signals are easy to detect and replicate. Samsung is working with both Visa and MasterCard to make substitute numbers available with LoopPay on the phones to boost security. James Anderson, a senior vice president for mobile at MasterCard, says the bank issuing the card needs to participate. If it doesn’t, some card holders might not be able to make mobile payments, even with the right phone. Samsung says participating banks will include American Express, Bank of America, Citi, JPMorgan Chase and U.S. Bank.
Will merchants be able to block Samsung Pay as CVS, 7-Eleven and a few others have done with Apple Pay?
Yes, but not easily. With NFC transactions, it was a matter of turning off the NFC chip. Samsung Pay has the magnetic backup, so it will be tough to turn that off without rejecting plastic cards, too. Merchants could potentially work with their payment processors to deny ranges of card numbers assigned as substitute account numbers, Gajda says. That’s unlikely, but not impossible.
What about Google’s own payment service?
Google recently teamed up with Verizon Wireless, AT&T and T-Mobile to have its Google Wallet payment service built into Android phones sold by those carriers. Google also is buying some technology from Softcard, a payment venture owned by the three wireless carriers. Both Google Wallet and Softcard use NFC.
Unlike Samsung Pay, Google Wallet will work on Android phones sold by other manufacturers. Samsung phones sold by those three carriers will have both services. Customers must pick one to use – so that they won’t end up paying for everything twice.
So far, Google Wallet uses regular card numbers, without the added security from substitute numbers used by Apple Pay or planned with Samsung Pay.
Will Samsung Pay work with other phones?
Future phones will likely get it, too. Older models likely won’t work, though. Although they have NFC, they don’t have LoopPay.