Last Tuesday, Re/code reported that Samsung is in talks with startup company LoopPay in launching its own mobile payment platform sometime in 2015.
According to sources, the South Korean mobile giant's system would be similar to Apple Pay, the mobile payment system which Apple developed and launched just this year. Like Apple Pay, Samsung's payment platform would let owners of Samsung devices to authorize credit card purchases at retail establishments.
Key to making this possible is LoopPay, the Massachusetts startup firm that has reportedly created a prototype of the payment system that works on a Samsung handset. But unlike Apple Pay which uses near field communications (NFC) technology, LoopPay's system is used in a fob and a digital payment card. Moreover, LoopPay uses a method called magnetic secure transmission, wherein users get to tap a smartphone near a credit card magnetic swipe terminal.
Interestingly, LoopPay's prototype also works with other smartphones apart from Samsung devices, including even iPhones. Indeed, if you use LoopPay's fob into an iPhone headphone jack and then use the LoopWallet app, you will be able to swipe in your debit and credit cards.
The fob can be used independently, facilitating mobile payment transactions using a default card and no security. But when paired with a mobile device, users can choose their preferred card and then input a personal identification number (PIN) to authorize the transaction. LoopPay has also made a smartphone case that features a removable fob.
However, there is a potential hurdle to LoopPay's system. Businesses are expected to slowly replace regular magnetic swipes with the safer EMV cards which utilize the chip and signature process of authorizing transactions. NFC-based payment systems (like Apple Pay) will not be affected by the EMV shift, which will happen in October late next year.
LoopPay though is working on incorporating a tokenization element in order to increase security in future editions of its payment system. With tokenization, transactions can be authorized without allowing business establishments to receive or view the actual payment details.
Some circles might see this latest development from the South Korean company as another reactive move to a newly launched Apple product. Looking at Samsung's recent history, it would be hard to argue otherwise. After all, when Apple launched Passbook in 2012, Samsung also introduced its Wallet app. And when the Touch ID fingerprint sensor debuted in the iPhone 5S, Samsung also incorporated a fingerprint sensor in the Galaxy S5.
Or, Samsung may just be taking advantage of an opportunity. Mobile payment systems are nothing new, but since the launch of Apple Pay, more and more people are now beginning to appreciate and actually use them. For Samsung, it's just common business sense to try and make the most out of a growing trend too.
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