Multinational electronics company Samsung Electronics Co. Ltd. is considering expanding its mobile payment service in the U.S. next year. Users would be able to make purchases online using “Samsung Pay.” Also, the mobile wallet will become available on more Samsung smartphones, rather than just the flagship models. This could be great news for Samsung stock investors. (Source: “Samsung Pay Plans to Enable U.S. Online Shopping in 2016,” Reuters, December 28, 2015.)
Samsung Stock: Samsung Pay Beating Apple Pay
Samsung launched its mobile payment service Samsung Pay on September 28, after running a month-long beta program. Thomas Ko, global co-general manager of Samsung Pay, said that the service has already become the most widely used mobile wallet in the U.S. The company said that within four weeks after its launch, Samsung Pay had processed an average of eight transactions per user in the U.S.
Samsung’s advantage in the mobile payment industry comes from its high compatibility. Samsung Pay works with both old and new credit card terminals. Its acquisition of LoopPay allows it to emulate magnetic stripe cards. Vendors using Square readers, retailers with NFC terminals, and stores with magnetic stripe readers do not need to have any special arrangement for Samsung Pay to work.
The same cannot be said for Apple Inc.’s (NASDAQ:AAPL) mobile wallet, “Apple Pay,” which was first launched in September of 2014. For Apple Pay to work, retailers need to install new equipment that supports near-field communication (NFC) compatible with its service.
Samsung Pay: Targeting PayPal Next?
Making the move into the online payment industry means Samsung would face established competitors such as PayPal Holdings, Inc. (NASDAQ: PYPL). Moreover, Samsung would not be the first company to move into this segment. Financial services company Visa, Inc. (NYSE:V) has launched “Visa Checkout,” while its competitor MasterCard, Inc. (NYSE: MA) has introduced “MasterPass.”
According to James Wester, research director of global payments at IDC Financial Insights, entering the online payment area “could be a smart move for Samsung.” He said that the move “will help them build customer habit and they can benefit from that when U.S. consumers transact in stores.”
Right now, Samsung Pay is only available on its higher-end models, including the “Galaxy Note 5,” “Galaxy S6,” “S6 Edge,” “S6 Plus,” and “S6 Active.” However, that is about to change. According to Ko, the company could start offering the service on lower-priced Samsung smartphones within the next year.