The world's biggest maker of Android phones launched a major challenge to Google Wallet on Sunday, saying it will soon launch a rival phone-based payment system.
Samsung Pay will appear first in the summer in the U.S. -- later in other markets -- and will allow consumers to make tap-and-go payments with a smartphone. It is being introduced as Google is moving to strengthen its position in the mobile payments market to better compete with Apple Pay.
The system will first be available on the Galaxy S6, Samsung's flagship smartphone that was launched on Sunday at Mobile World Congress in Barcelona. It will rely on the contactless NFC payment infrastructure already used by competitors including Google Wallet and Apple Pay.
In the U.S., where NFC payment acceptance is low, the phones will also be able to communicate with traditional magnetic card payment terminals, via technology recently acquired by Samsung when it bought LoopPay. That means a phone can be used to make purchases at almost any electronic payment terminal.
Like Apple Pay, Samsung Pay will utilize one-time payment tokens instead of credit and debit card numbers. Tokens are said to be much more secure because they don't reveal the customer card number and cannot be reused. And also like Apple Pay, users will be able to authorize payments by holding their finger on the home button, which includes a fingerprint reader.
A major difference between Samsung Pay and Google Wallet will be the roles each company takes in the payment process.
In Google Wallet, all payments are run through Google, which means the company sees every purchase a consumer makes. In Samsung Pay, as with Apple Pay, the company doesn't have access to that data, said Jorn Lambert, an executive at Mastercard, which worked with Samsung on the system.
Samsung Pay's launch will heighten competition in the Android mobile payment market.
Despite being on the market since 2011, Google Wallet has largely gone nowhere and SoftCard, a competing app from three of the biggest U.S. cellular carriers, has also received little uptake from consumers. In February, Google acquired SoftCard technology to unite the two with the idea of strengthening Google Wallet to better compete with Apple.
The Samsung Pay launch will muddy the waters a little, particularly if Samsung blocks Google Wallet from its phones -- which it has not yet said it will do.
But perhaps the biggest battle is against the plastic payment card. In use for years and intimately familiar to many consumers, plastic payment is fast and easy.
"What's lacking in the industry is a move beyond payments to offer more benefits and a reason to use a phone instead of cash or a card, which work pretty well today," said Sandy Shen, an analyst at Gartner in Beijing. She doesn't expect mobile payments to have a significant impact for a couple of years, and only when loyalty cards, promotions and coupons are a more integrated part of the phone payment process.
The mobile wallets support such loyalty cards, but many retailers are moving cautiously, in part because they don't want to give away customer information to the likes of Google.
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