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Mobile Payments: More Than Just A New Way To Pay

Learn the fundamentals of mobile payment technology and what to consider when implementing a new payment strategy

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February 18th, 2015

Samsung May Announce “Samsung Pay” At Mobile World Congress 2015

Part of the "The Crossroads Of Ecommerce" Series

Samsung to be the next manufacturer to release a mobile wallet to combat Apple Pay.

Samsung will soon be a provider of mobile payments with a new service and wallet expected to be announced at Mobile World Congress in Barcelona next month.

Samsung is expected to announce a mobile wallet and a mobile transaction method with its Galaxy S6 smartphone at MWC on March 1st. The mobile wallet may be called “Samsung Pay” and will likely include Near Field Communications and Magnetic Secure Transmission from Massachusetts-based startup LoopPay.

Samsung and LoopPay announced Wednesday that the manufacturer will acquire LoopPay and the startup will become a wholly owned subsidiary of Samsung, based in Massachusetts.

“This acquisition accelerates our vision to drive and lead innovation in the world of mobile commerce. Our goal has always been to build the smartest, most secure, user-friendly mobile wallet experience, and we are delighted to welcome LoopPay to take us closer to this goal,” said JK Shin, president of Samsung’s mobile division in a press release.

Mobile Beta Management Learn the benefits, best practices and toolkits for mobile beta management Get It Now

LoopPay works differently from the “tap” of NFC-based wallets like Apple Pay. Magnetic Secure Transmission (MST) from LoopPay uses existing magnetic card readers on point-of-sale devices to allow smartphones or smartwatches to mimic the magnetic stripe on the back of a plastic credit or debit card. The end result is that a card reader at a merchant will believe that a card was swiped even though the information actually came from a smartphone.

See also: The Crossroads Of Ecommerce (Series)

LoopPay has long claimed that its service works at more than 90% of all merchants across the United States (LoopPay does not work at ATMs or parking lots where you need to insert a card into a slot). Its main claim to fame and marketing material has long been to assert that it can bring mobile payments to the masses without needing merchants to upgrade existing payment terminals.

To this point in its history, LoopPay has only provided its solution with odd dongles, key fobs and smartphone cases. For the most part, the external accessories were a proof-of-concept before LoopPay could be integrated into smartphones. CEO and founder Will Wang Graylin has promised (to both me and the payments industry at large) that its solution would eventually makes its way into hardware of smartphones and the hint has been that Samsung would be the first.

Now that Samsung has bought LoopPay, Graylin’s vision will soon become a reality.

ARC also believes that Samsung will announce “Samsung Pay” at Mobile World Congress based on an email from “mobile proximity commerce provider” Proxama pitching itself as a go-to expert to discuss Samsung Pay. Proxama’s email said it could “offer on-site commentary about Samsung’s March 1st Samsung Pay announcement.”

Tokenization And Security Of LoopPay

Apple Pay is considered the safest form of mobile payments from consumers because it employs a technique called tokenization to secure transactions. Tokenization is a method of obscuring the actual payment credentials of a user by providing a unique identifier in lieu of actual payment information that is then processed on the back end by banks and payment gateways. For Apple Pay, the unique identifier token is used once for every transaction and cannot be used again.

See also: How To Develop Apple Pay Apps

LoopPay does not currently support tokenization. In a text to ARC, Graylin noted, “Yes we will support tokenization, can’t talk dates.”

It thus remains to be seen if Samsung will have tokenization—considered essential in the future of mobile payments security—for Samsung Pay at launch. Tokenization technology for payments is an open source standard in the payments industry supported by the likes of MasterCard, Visa and American Express.

In a short interview at the 2015 International Consumer Electronics Show in Las Vegas, Graylin talked about the future of tokenization in mobile payments.

Graylin said:

It would be an additional standard on top of what already exists. Retiring anything of legacy in payments takes a very long time. MagStripe is going to be around for a very long time, so it chip card. Adding tokenization means that we can finally deliver one-time use across different channels. I am looking at more than just physical [paying in store with a smartphone], I am looking at it in ecommerce and online channels.

And as that becomes more credible and hopefully over time you get less and less use for traditional MagStripe and even for chip cards as you use mobile versus the plastic card.

Much more difficult [in a plastic card]. The security inside a chip is already pretty secure. When you take that number and you use it online, that is when it becomes not secure. The bigger problem right now is actually online, most fraud is happening online.

LoopPay announced a partnership with a few accessory manufacturers at CES 2015 including Trident Case and XPAL Power (a subsidiary of Tennrich International). Graylin noted at the time that the accessory partnerships were just, “the tip of the iceberg.”

LoopPay’s partnership with Samsung has been reported several times though never made official by either company before the acquisition was announced today.