Samsung acquires LoopPay, makes big move into mobile payments

Wall Street Journal:

LoopPay’s technology, however, purports to sidestep one obstacle that has so far hindered the wide adoption of mobile-payment services: the need for merchants to have to upgrade their checkout devices. Instead, LoopPay says its magnetic induction technology allows a smartphone to be tapped against the magnetic-stripe-reader machine that is already found in Samsung’s service, which is expected to be launched when Samsung unveils its Galaxy S6 smartphone in Barcelona in about a week’s time, would allow a consumer to register credit, debit, gift and loyalty cards onto a Samsung smartphone, and use the handset to make purchases, instead of carrying the cards in a physical wallet.

First things first, this time Samsung has gone too far. Jim put so much effort into his Heineken based mobile payment service which (I have this under the highest authority) he was going to call LoopPay.

Kidding aside, LoopPay uses a magnetic field to interface with existing magnetic strip readers. In effect, it allows a phone to mimic an actual credit card and is said to work with most existing card readers, meaning merchants won’t have to make any changes to accept LoopPay.

From a WSJ blog post that lays out the mechanics:

To use LoopPay, first you register your existing credit cards in its app (as many cards as you like). Once you’ve done that, you can pay by opening the app, tapping in your LoopPay-specific PIN, selecting your card and then holding your phone close to the merchant’s card swipe slot. When you do, most machines will recognize LoopPay’s magnetic signal as a swipe, and the transaction will proceed.

You can also remove your LoopPay fob from the phone if it’s easier to just hand it to the merchant—the cashier just needs to press a physical button on the dongle. The signal emits from the dongle, so it can even work when your phone’s battery has died. Of course, Samsung hasn’t said much yet about how it might implement LoopPay in its phones, but I could imagine there will be differences with the software and hardware.

Though I do like the fact that the technology can work with existing card readers, this seems like a short sighted system to me. It does not solve the security problem and it is far less convenient to use. You have to open an app and type in a pin.

With Apple Pay, you hold your finger on the Touch ID sensor, tap the merchant terminal, wait for the confirmation beep (which happens almost instantaneously) and boom, you’re done. And, unless I’ve missing something here, Apple Pay offers security that is head and shoulders beyond that of LoopPay.

Short term, LoopPay is an interesting alternative to pulling your credit card out of your wallet, if you have the right piece of hardware. Samsung is betting that LoopPay is enough of a draw to get you to invest in the next generation Samsung phone. Obviously, Apple is doing the same. It’s a horse race, of a sorts. But in this race, time favors Apple. Once Apple Pay acceptance hits a critical mass, compatibility with legacy merchant terminals will be less of an issue and ease of use and security will become the driving factors. And Apple Pay wins that one, hands down.