Samsung Wednesday unveiled plans to buy mobile payment system LoopPay, marking the smartphone vendor's move to compete in the mobile-payment space.
The acquisition is the South Korean company's response to the booming success of Apple's payment system Apple Pay, said solution providers.
"Samsung wants to be in the same market and space as Apple Pay… it's a very competitive market," said Steven Kantorowitz, president of New York-based Samsung partner CelPro Associates. "Apple has taken the lead in this field, and Samsung is starting a little bit behind. But it's a tremendous market, and there's so much revenue to be earned from this move. As long as Samsung's mobile wallet is secure, consumers absolutely would want this system."
LoopPay, a Burlington, Mass.-based company first founded in 2012, touts its Magnetic Secure Transmission technology as an advanced contactless payment offering that turns existing mag stripe readers into mobile contactless receivers without changes or costs for the merchant or client.
The terms of the deal, including the purchase price, were not disclosed. Samsung did not immediately reply to a request for further comment.
Unlike other mobile payment systems, Magnetic Secure Transmission allows consumers to tap their smartphones against the magnetic stripe reader machine available in most retail stores, according to LoopPay. Other mobile payment systems have required retail merchants to upgrade their checkout devices in order to effectively operate. The company's digital wallet can store an array of mag stripe cards including debit and credit cards.
LoopPay offers several security features, such as password and PIN-protected data. The company also says it stores and encrypts all card track data in secure memory within the LoopPay device. Its technology has the potential to work in 90 percent of existing point-of-sale terminals, Samsung said, citing internal research.
Samsung executives said the acquisition will enable the company to deliver top-notch mobile payment solutions to customers.
"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 and head of Samsung's IT and Mobile Division, in a statement.
Samsung, along with Visa and Synchrony Financial, was already an investor in LoopPay and helped fund the development of its MST technology, according to the statement.
The move to acquire LoopPay comes after Samsung faced tough competition from Apple in the 2014 holiday earnings quarter. While Samsung remained the top global smartphone vendor by shipments in the fourth quarter of 2014, second-place vendor Apple made significant gains to trail behind Samsung by only 600,000 shipments, according to IDC.
Though the acquisition puts Samsung on the mobile payment spectrum, the company still has a long way to go to reach the widespread success of Apple Pay, released in September, which competes in the mobile commerce market alongside Google Wallet and eBay's PayPal.
The Apple Pay service makes up $2 out of $3 spent on purchases using contactless payment across the three major U.S. card networks, according to Apple. The system was recently embraced by the U.S. government as a payment system for federal functions, like national parks.
"Apple has the advantage of having the most loyal consumers and strongest brand in the mobile device market," said Jack Narcotta, devices analyst at Technology Business Research Inc. "The iPhone is so important for Apple Pay being a success because it hinges on the user base's trust. But Samsung's not necessarily trying to compete with Apple. It is following that company's lead while taking a different track. It's not revolutionizing the mobile payment space, but trying to make paying with mobile devices easier."
PUBLISHED FEB. 18, 2015