Samsung is thinking bigger than the Galaxy S6 for its emerging mobile payments platform.
Apple and Google want to be the technology companies that dominate mobile payments. Apple Pay is off to a decent—if moderate—beginning while Google looks to revamp its in-store mobile payments Google Wallet solution by making a deal with cellular carriers and acquiring Softcard this week.
Samsung, as is often is wont, will not be left out of the discussion. Samsung may announce a new digital wallet called “Samsung Pay” as part of its new flagship Galaxy S6 smartphone at Mobile World Congress on Sunday, March 1st in Barcelona. But Samsung’s ambitions in the mobile payments space will not stop at launching a digital wallet to compete with the likes of Apple Pay, Google Wallet or PayPal.
Samsung acquired Massachusetts-based LoopPay this week. In an interview with ARC, LoopPay co-founder and CEO Will Graylin says that Samsung wants to be major factor in driving the acceptance of mobile payments from both a component and services standpoint.
“We were looking at this very holistically and said, ‘how can we make an impact in the payment industry?’” Graylin said. “This is more of an ecosystem play and how do we make it really big with Samsung as the very first handset to implement this solution. To go beyond that, this is not just looking at tying into one handset but looking at the larger picture of the overall ecosystem.”
LoopPay was founded in 2012 by Graylin and CTO George Wallner, both serial entrepreneurs that have sold or taken companies public and decades of experience in the payments industry. Wallner is responsible for building LoopPay’s Magnetic Secure Transmission (MST) technology that enables a payment to be made from a device or an accessory at any merchant that accepts credit card readers.
Graylin and Wallner have signed multi-year contracts to grow the Samsung the Payment Services Group, a division of Samsung Mobile. LoopPay and Samsung will stay in the Boston area build out the Payment Services Group in conjunction with Samsung offices in Mountain View, Calif. and Korea. Graylin will serve as co-general manager of the division and report to Injong Rhee, executive vice president of Samsung’s technology services group.
Samsung’s acquisition of LoopPay closed this week. Graylin declined to discuss the financial terms of the acquisition.
“We share the vision with the folks at Samsung and they want us to stick around and help them drive that vision,” Graylin said. “That is why most of us signed up for a multi-year contract. If it weren’t for them having the same vision, frankly, we would have not have sold. That’s the truth.”
Graylin also declined to mention any specific products that LoopPay and Samsung have been working on, but alluded to the fact that Samsung will indeed announce a mobile wallet (likely based on LoopPay and NFC capabilities) as part of the Samsung Galaxy S6 smartphone announcement at MWC.
“I think they [Samsung] will have plenty to announce,” Graylin said. “You will hear what their thoughts are and at least their initial salvo on their thoughts on payments.”
With information from Graylin and what we know of Samsung’s ambitions, we can make some inferences on what the road map for Samsung’s mobile payments ambitions look like.
A Partnership A Year In The Making
Graylin said that the partnership with Samsung started over a year ago and included an investment by Samsung in July 2014 that was never announced by the companies.
“That path [to acquisition], initially started out as commercial, as a commercial product type of path,” Graylin said. “So you can probably safely assume some of the things without me officially discussing products.”
Of course, the safe assumption is that LoopPay and Samsung have been working on baking LoopPay’s MST technology into Samsung handsets and that it will land in the Galaxy S6 later this week. Broader implications exist now that Samsung owns LoopPay.
Samsung makes just about every type of gadget or appliance in the world. Smartphones are a cash cow from the Korean giant, but televisions, washer and dryers, refrigerators, connected home gadgets home gadgets and more are all in its portfolio. LoopPay could easily be baked into all of Samsung’s mobile products, including tablets, phablets and smartwatches.
Samsung is also one of the biggest device component suppliers in the world. Samsung has supplied Apple with components for the iPhone and quietly supplies many other accessory and device manufacturers with components as well. An imaginable scenario for Samsung is to add LoopPay into its component chain and supply the likes of Apple, Motorola, HTC, LG and others with MST technology (the LoopPay component is a small square ring that fits in a device the size of a watch or keychain dongle).
In addition, LoopPay brings Samsung a moderate amount of clout and existing partnerships with financial institutions and merchants large and small. Graylin has long touted the benefits of LoopPay to card issuers and payment gateways. As the name implies, the Payment Services Group in Samsung will be more than just about hardware and a digital wallet in Samsung smartphones.
The hardware is an enabler and a component that can be embedded into a variety of devices including accessories and into handsets and smartphones. I think that the first focus is to make sure that we do this right within the Samsung hardware. Obviously we have accessories that are out there but we are focused on the Samsung device platform first.
The division goes much bigger than just Samsung devices. I can tell you that that is a shared vision. In terms of when and whom, those questions we won’t answer right now. But we can say that the division is bigger and we do believe that the services is an important part and that we want to be able to provide as many users and as compelling of a service to those users as possible, which also includes being able to help our financial institutions partners that are out there as well as our merchant partners.
The Road Map For LoopPay
As for the future of LoopPay, most of the features and functions that the company has been working on before the Samsung acquisition will continue. For instance, LoopPay is working to bring tokenization to MST technology as well as continuing to build relationships with merchants and card issuers like MasterCard and Visa.
“Being able to deliver their private label cards, their gift cards, the loyalty programs and use that as a conduit. We see this as a larger ecosystem play,” Graylin said. “I should say that that vision is not lost within Samsung.”
The big goal for Samsung and LoopPay, according to Graylin, is to push acceptance of mobile payments. The benefits of mobile payments adoption are obvious for card issuers and banks, merchants and consumers. The issuers and banks want to prevent fraud and increase the speed of transaction. Merchants want to be able to accept the next generation of payments without changing their point-of-sale systems, a feature that LoopPay’s MST solution has promised since it was launched. Consumers want ways to pay that are not inherently difficult or different from the current plastic and cash and can provide expected and unexpected benefits (like loyalty programs etc.).
Graylin notes the benefits of mobile transactions for issuers and merchants:
That means that consumers can also start getting into a habit of using their mobile devices to pay in more scenarios like you see in Hong Kong with Octopus and Japan with Silica. It starts eating into cash. The issuers love this solution because it can reduce fraud, reduce cash transactions and make more digital transactions and improve customer engagement through the digital wallet. Those are the things that excite a card issuer.
Merchants are also excited. Merchants don’t have to change the POS terminal, they are already having a hard enough time migrating to EMV. I was just at the MAG Conference—the Merchant Advisory Group—and they basically said that look, it is not just the cost of the hardware but the software, the integration, the certification. We just don’t want to constantly be changing our POS systems.
In the end, the LoopPay acquisition is an astute, if curious, one by Samsung. The key for Samsung will be to follow through on Graylin’s vision to bring MST technology to the wider ecosystem outside of Samsung and its forthcoming mobile wallet in the Galaxy S6. If Samsung can approach the payments industry with a board mind—and not just try to compete with Apple Pay and Google Wallet—it may eventually find a modicum of success.