September 24, 2014
Samsung had NFC in its phones before Apple. It also brought some payment applications (like the Paypal app with biometrics in Galaxy S5) before Apple. But it is Apple Pay which is taking the world by storm. Apple Pay worked with card networks, banks, merchant partnerships to make contactless payments happen. Not to talk about the 800 mn+ cards on file and the customer education that is happening currently. At the center of all this is Touch ID for verification, NFC for payment and Tokenization as well. Samsung is furious and wants to strike back. Now as we all know Apple will start Apple Pay payments next month, but we also have unconfirmed news that Samsung is bringing its own (and similar) system in next few months. It could be all in one big launch at MWC or it (mobile payments and not Watch based payments) could be earlier than that.
A couple of weeks ago, Samsung had released a new smartwatch, Gear S with 3G and WiFi capabilities. New sources reveal that Samsung is already working on successor of Gear S and is collaborating with PayPal and Synaptics to bring in IOT payments. Synaptics is a biometrics verification specialist and Samsung could possibly integrate a fingerprint scanner into its next smartwatch. The next Samsung smartwatch is poised to be released at MWC 2015 (Mobile World Congress). Thats a little far from today so lets talk about mobile payments.
Biometrics (Apple has Touch ID)
Synaptics is a company that specializes in biometric verification such as fingerprints. It has established the Fast Identity Online Alliance, an international consortium for biometric identification. Its members include major financial institutions like PayPal, LG, Bank of America, Google, Visa, Microsoft and Samsung Electronics. The member card companies and financial institutions are synchronized in one network because of biometric identification applications jointly developed by them as part of their membership under the alliance. This is a prime reason why Samsung is expected to use Fast Identity Online Alliance for biometrics in phones and watch to rival Apple.
Richard Bergman, CEO of Synaptics, had commented: Since last year, we have been focusing on developing swipe type technology through which user verification is done upon swiping the fingerprint on A screen, together with Samsung Electronics and PayPay. However, starting from the second half this year, we will concentrate more on developing the area type payment system, which can work within a limited range such as with wearable devices. Wearable devices with fingerprint verification and relevant solutions will be released early next year.
Why Samsung needs Biometrics in mobile payments? Because you can do away with Pin entry. What Apple Pay did very smartly is to reduce an un-necessary process of entering PIN and have Touch ID authentication replace it very securely. A masterstroke of sorts to mix Touch ID with NFC and basically become EMVco compliant. This is something Samsung can't ignore.
User Base (Apple has cards-on-file)
Samsung doesn't have cards on file to that extent because it relies on Android and therefore Google to do that. So it needs partners like Paypal who have a user base. Samsung’s new proposed smartwatch-based payment system would also enable checking transaction information and account balances via text messages. Samsung would leverage PayPal for payments service and plans to spread it across multiple geographies starting with 25 countries in initial phase and further taking this number to 50. The service cannot be used in Korea, as PayPal payment system has not been introduced yet. To tackle this, Samsung is even considering bringing in a similar service internally.
Tokenization (Apple has Visa and MS working with it)
But that support is not exclusive. Infact Visa and MS have said that other players can also use the tokenization framework they have developed. So Samsung would most probably make use of it.
If you look at it, Apple has already shipped more than 10 mn NFC/EMV mcards in U.S. in less than 10 days. And these mcards or the iPhone 6 and 6 Plus will be used a lot everywhere. This is the customer segment that is very geeky and trendy. This certainly has Samsung worried because this would further lead to sale of iPhone 6 to that 10 mn segment. Samsung seems to be at warfooting and is looking at best available resources to come up with something in response. Apple does boasts of its partnership with Visa but Samsung can leverage the power of card networks too as Visa and MasterCard have clearly cited that tokenization is not something that is exclusive to Apple only.
In an exclusive interview with Business Korea, a high ranking official at Samsung commented: We are currently developing the smart watch equipped with fingerprint identification technology and relevant solutions through cooperation with PayPal, the world’s most renowned financial transaction service company, as well as Synaptics, a global company specialized in biometric verification. By the earliest, the third generation smart watch to be released early next year will have this new system in which payment is authorized immediately when users identify themselves through biometric sensors such as a fingerprint or login.
Samsung has the hardware and software capabilities, the highest share among the Android phones and a global reach. It certainly has the ability to create disruptions in the payments market. Even its partners are aware of the same. PayPal had launched biometric enabled app for Samsung when the Galaxy S5 smartphone was launched. It will do so again and we can certainly expect something innovative when Samsung unveils its next smartwatch next year.When Samsung introduces smartwatch-based payment system at the MWC it would not stop at that. The system is poised to use NFC along with biometrics to identify customers, receive promotional offers and choose products before collecting them in store.