In its press conference yesterday, Samsung made a few big announcements, including the introduction of two smartphones and the company’s new mobile payment system Samsung Pay.
Now when Samsung first announced that it had a mobile payment system up its sleeve back in March, I remember feeling the collective sigh in the tech industry. Did we really need another competitor in the mobile payment space? After all, the more competitors there are, the more difficult it will be for a single system to win out and become universally available at most places of commerce.
That really is the problem with mobile payment systems—or any payment systems in general. There is a tipping point that exists—a threshold that must be surpassed where people will only be comfortable switching payment systems once they are confident that nearly all vendors will accept the new system.
Only once card readers were cheap, easy to use, and demanded by customers did nearly all vendors pick up the technology to receive them. That tipping point was hit with card readers, but because it required the purchasing and installation of new technology, it actually took quite a long time. In fact, it took over 15 years for debit card purchases to surpass check purchases and far longer to get to a point to where people were comfortable living with little to no cash in their wallets.
So how long will it be until we can ditch our credit and debit cards completely? Well that’s where Samsung Pay might really change things.
That same tipping point that had to happen with card readers will be true with mobile payment systems that depend on business purchasing new terminals. New technology has to be purchased and installed—and it has to be used enough for it to be seen as a worthwhile investment for the business. That’s why as it stands, Apple Pay, Google Wallet, and every other NFC-dependent mobile payment system have a long to go before becoming something people actually rely on and use for transactions. If the goal is to get to a point where people might be comfortable walking out their front door without a single payment card, we’re nowhere close.
However, it was clear yesterday that Samsung demonstrated an understanding of this tipping point problem. Ironically enough, Co-CEO Jong-Kyun Shin suggested that Samsung wasn’t as interested in being first at technology as it was in being good at it (which goes against pretty much everything the company has done in the mobile space in the past five years). Thanks to the company’s understanding of mobile payments and the obstacles that prevent a serious adoption rate might though, Samsung Pay just may be one that actually sticks.
The main reason is that Samsung Pay uses a different kind of technology than just NFC (near-field communication) unlike every other mobile payment system out there. Earlier this year, Samsung acquired a company called LoopPay for $250 million, which pioneered a technology called Magnetic Strip Transmission that allowed smartphones interact with magnetic swipe card readers that every vendor already has.
LoopPay was originally a peripheral for the iPhone in the form of a clunky case that housed the technology to complete the transaction. So while the implementation wasn’t quite there, LoopPay demonstrated that the technology really did work—and if used correctly, could really change the way we think of mobile payment systems.
Now Samsung has taken the LoopPay technology and built it right into its newest flagship smartphones. The new Galaxy Note 5 and Galaxy S6 Edge+ come with the LoopPay technology onboard, meaning once the service launches in the US on September 28, you’ll be able to use them to purchase
Samsung Pay is not a perfect solution for a rapid adoption of mobile payments, of course. The primary problem is that it requires a Samsung phone, which already segments off a large population of people who wouldn’t switch from their iPhones even for a feature this exclusive. The second problem is that it won’t work at certain places where a card must be slid in completely such as gas stations and parking meters. Because of that, even people with the correct smartphone and the willingness to try it can’t completely leave their wallets at home.
But despite those caveats, it looks like Samsung Pay could be the mobile payment system that empowers people to keep their wallets in their pockets.