The stakes are high in the mobile wallet market, projected to top $140 billion by 2019. Recently, Samsung announced that it will roll out a payment system called Samsung Pay later this year. While Google and Apple have already entered the market, Samsung’s new mobile wallet strategy may be a sign that the company is finally becoming a true leader. The irony is that they are embracing an older payment technology to pave the way for new growth.
Apple was the first mover into mobile payment options with its Apple Pay, introduced in late 2014. Google countered with Android Pay. Apple and Google both employ a NFC (Near Field Communication) technology, where offline retailers install terminals that consumers can tap with their smartphones to securely pay with preregistered credit cards. Samsung, by contrast, allows consumers the option to use MST (Magnetic Secure Transmission) in areas where the newer NFC terminals have not been installed, giving it a much broader potential market.
In addition, Samsung, like Google, will not charge users for paying with their smartphones. (Apple’s transaction fee of .15 percent of the purchase amount limits retailers’ adoption of Apple Pay.)
Of course, risks are looming in the payment market horizon. Retailers, both online and offline, are gearing up their own payment systems. Even though the payment system CurrentC, developed by a consortium of retailers including Walmart, has not received good reviews, it shows that the major payment players will have to forge alliances with retailers.
The “mobile only” evolution is also taking place in consumer purchasing. In India or China, e-commerce via smartphones has become a high-growth retail space. Plus, the e-commerce juggernaut Alibaba has entered the mobile wallet market with Alipay. The mobile wallet market is still in its infancy. Companies coming into it from the device, credit card, retailer or social network base need to be nimble-minded, instead of sticking to their tried-and-true industry practices. Dae Ryun Chang
Dae Ryun Chang is a business professor at Yonsei School of Business.