Samsung Buys LoopPay

Samsung Electronics Co Ltd has acquired U.S. mobile wallet startup LoopPay, signaling its intention to launch a smartphone payments service to compete with rival Apple Inc.

Mobile payments have been slow to catch on in the United States and elsewhere, despite strong backing. Apple, Google, and eBay Inc’s PayPal have all launched services to allow users to pay in stores via smartphones.

The weak uptake is partly because many retailers have been reluctant to adopt the hardware and software infrastructure required for these new mobile payment options to work. These services also fail to offer much more convenience than simply swiping a credit card, Samsung executives said on Wednesday.

LoopPay’s technology differs because it works off existing magnetic-stripe card readers at checkout, changing them into contactless receivers, they said. About 90 percent of checkout counters already support magnetic swiping.

“If you can’t solve the problem of merchant acceptance…, of being able to use the vast majority of your cards, then it can’t really be your wallet,” said David Eun, head of Samsung’s Global Innovation Center.

Injong Rhee, who is leading Samsung’s as-yet-unannounced payments project, said the Asian giant will soon reveal more details of its envisioned service. He would not be drawn on speculation the company may do so during the Mobile World Congress in Barcelona.

He said new phones such as the upcoming, latest Galaxy would support the service.

Apple Pay, launched in September, allows iPhone users to pay at the tap of a button. Executives have lauded its rapid rollout so far, including the fact that more than 2,000 banks now support it and the U.S. government will accept Apple Pay later this year.

But Apple Pay requires retailers to install near-field communication and some have been reluctant. In addition, many retailers such as Wal-Mart Stores Inc and CVS Health Corp, back their own system, CurrentC.

Samsung had invested in LoopPay, along with Visa Inc and Synchrony Financial, before its acquisition. Terms of the deal, which Samsung negotiated over several months, were not disclosed.

It’s unclear how else Samsung could differentiate its service versus Apple’s or other rivals.

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Bitcoin Use Growing

Bitcoin is gaing greater acceptance at U.S. online merchants including Overstock.com and Expedia, as customers use a digital currency that just a few years ago was virtually unknown but is now showing some staying power.

Though sales paid for in bitcoin so far at vendors interviewed for this article have been a fraction of one percent, they expect that as acceptance grows, the online currency will one day be as ubiquitous as the internet.

“Bitcoin isn’t going anywhere; it’s here to stay,” said Michael Gulmann, vice president of global products at Expedia Inc. in Seattle, the largest online travel agent. “We want to be there from the beginning.” Expedia started accepting bitcoin payments for hotel bookings on July 11.

Until recently a niche alternative currency touted by a fervent group of followers, bitcoin has evolved into a software-based payment online system. Bitcoins are stored in a wallet with a unique identification number and companies like Coinbase and Blockchain can hold the currency for the user.

When buying an item from a merchant’s website, a customer simply clicks on the bitcoin option and a pop-in window appears where he can type in his wallet ID number.

Still, broad-based adoption of bitcoin is at least five years away because most consumers still prefer to use credit cards, analysts said.

“Bitcoin is a new way of making payments, but it’s not solving a problem that’s broken,” said George Peabody, payments consultant at Glenbrook Partners in Menlo Park, California. “Retail payments aren’t broken.”

There are also worries about bitcoin’s volatility: its price in U.S. dollars changes every day.

That risk is borne by the consumer and the bitcoin payment processor, such as Coinbase or Bitpay, not the retailer. The vendor doesn’t hold the bitcoin and is paid in U.S. dollars. As soon as a customer pays in bitcoin, the digital currency goes to the payment processor and the processor immediately pays the merchant, for a fee of less than 1 percent.

“We don’t have to deal with the actual holding of the bitcoin: it’s the payment processor that takes the currency risk for us,” said Bernie Han, chief operating officer at Dish Network Corp, in Englewood, Colorado. “That’s what makes it appealing for us and I guess for other merchants as well.”

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Is NFC Catching On?

Near Field Communication (NFC) is steadily gaining adoption in the U.S. for sharing data and music among smartphones, but the technology faces years of slow growth as a replacement for physical wallets.

NFC will take a minimum of three more years to grab hold as a technology that enables so-called mobile wallets as a replacement for credit cards and cash in the U.S., according to a consensus of five analysts. And by “grab hold,” these analysts mean being used by only 10% of mobile phone users to make digital purchases.

Gartner analyst Avivah Litan predicts that NFC payments will hit the 10% threshold in 2015, compared to the process of SMS (texting) payments that is expected to represent 50% of mobile payment volume globally in that same year. “We’re still on the edge when it comes to NFC innovation,” Litan says. “It will take a decade before it’s mainstream across the globe.”

Dozens of new smartphones that run Android, BlackBerry and Windows, and that include an NFC chip, launched last year. But Apple notably did not put NFC in its new iPhone 5 when the phone launched in September. That move “surely had a significant detrimental impact on industry adoption of NFC,” Litan says, given Apple’s influence in the mobile market.

Apple justified the move by saying that consumers already could use its Passbook app, which shows barcodes on the display, instead of NFC. The barcodes contain information that can be scanned by optical readers to let users board planes and redeem movie tickets — tasks that Apple notes are “the kinds of things consumers need today.”

Some have criticized Apple for omitting NFC from the iPhone 5, which has led to a widespread reassessment of NFC’s immediate future, especially in the U.S.

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Google Jumps Into Mobile Payments

Google is joining Citigroup and Mastercard to establish a mobile payment system that will turn Android phones into a kind of electronic wallet, the Wall Street Journal said, citing people familiar with the matter.

The new system, which is in its early stages, will allow consumers to wave their Android phones in front of a small reader at the checkout counter to make payments, the Journal reported. 

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