Game on: Samsung Pay joins fight for digital wallet share

One year after Apple Pay launched and 18 days after Android Pay launched, Samsung Pay has arrived in the U.S. market. The battle for share of digital wallet is fully joined.

Although there are other players in the mobile payments space, most experts see Apple, Android and Samsung as the big three, at least for the near future.

Although Samsung Pay and Google's Android Pay will compete directly for users of Android phones, Samsung has been targeting the Apple iPhones with aggressive promotions on behalf of its Galaxy and Note devices.

While Merchant Customer Exchange's CurrentC has the backing of many major retailers and is now in test, it may not launch until next year. Expectations are currently low for its eventual success. PayPal Mobile is another competitor.

There are distinct advantages for each. Apple Pay has had the longest head start and the loyal following of iPhone users, but can only be used from the company's latest phones and at certain locations. Android Pay can be used on many more phones—as many as 1,000 different devices—but like Apple Pay, it is accepted in a very limited number of locations. Samsung Pay is also limited to the company's latest devices, but can be used wherever there is a magnetic stripe reader. Samsung plans to extend the program to older Samsung phones with near field communication chips.

      Samgsung Pay, courtesy of Samsung

Samsung Pay's emulation of a magnetic stripe card comes from Samsung's acquisition of a company called LoopPay and its patented technology Magnetic Secure Transmission, according to TechCrunch. Apple Pay and Android Pay users have to check first to see if a merchant or service supports NFC transactions before they can tap to pay; however, Samsung will work at almost every terminal where there is a credit/debit card reader.

"Samsung Pay works with almost any card terminal from day one and Galaxy owners can shop with a wallet they never knew was always in their hands," Injong Rhee, exec-VP of Samsung Electronics, global head of Samsung Pay, said in a company statement. "As the leader in innovation, Samsung is proud to introduce the first mobile payment solution that allows you to pay almost anywhere you can swipe or tap your card today."

For security, the system uses tokenization, Samsung's Knox technology and fingerprint authentication.

While Apple Pay has lined up over 500 U.S. banks and nearly all payment card networks, Samsung Pay and Android Pay are much more limited, at least for now. But Samsung Pay was very successful in its first month in South Korea, racking up more than $30 million in accumulated transactions, according to a company statement.

"Although the details on Samsung Pay usage are constantly being updated, the response we've received so far has been beyond our expectations," Rhee said. "We knew Samsung Pay would be a game-changer in the mobile payments industry and now with the user data, we are seeing the greater impact it is having on consumer behavior and on the lifestyle of our customers."

Following Samsung Pay's Sept. 28 launch in the U.S., the company plans to bring the service to the U.K., Spain and China. Samsung Pay can now be used with the Galaxy S6, S6 edge, S6 edge+ and Note5 devices. It will also support NFC technology on the Samsung Gear S2 watch in some countries after its launch on Oct. 2.

The delay in Samsung Pay's launch was not because of any technical reason, reported, but simply to line it up with the September release of the company's "flagship" smartphone, the Galaxy S6 Edge.

"If you put two and two together, you'll see that [September] makes sense. It's where we can actually get the most bang for the buck," said Will Graylin, global co-GM of Samsung Pay and CEO of LoopPay. "So that's one misconception [about the delay until September] that people need to be clear about."

There were other reasons. "If anything, we think that by the time we launch (in September), that we will have significant announcements associated with which banks and which networks are participating with Samsung Pay, and even which merchants and which programs attached to merchants will all be a part of Samsung Pay," Graylin said.

Samsung did not lose much ground because so few Americans are using digital wallets, according to a study by Gallup Panel Web. Only 2% of consumers use digital wallets, Gallup said, leaving plenty of room for growth.

For more:
-See this Samsung statement
-See this TechCrunch article
-See this article
-See this blog post in the Gallup Business Journal

Related stories:
Everybody's talking 'payments'
Customers want payment options; many retailers reluctant to invest
Samsung Pay to launch; CurrentC may wait till next year
Only 2% of U.S. consumers use digital wallets
Apple Pay expands in apparel; Google sets Android Pay launch