HERE’S WHAT’S GOING ON WITH SAMSUNG PAY: In our last mobile payments report we argued that Samsung Pay would be a significant driver of in-store mobile payments adoption in the US. That’s because it can be used to make payments at existing magnetic stripe terminals as well as EMV and NFC-capable terminals.
Not long after the publication of our report a blog post came out claiming that Samsung Pay would fail in the US. The argument has two major points, which we have drawn out through emails with the author of the post:
- Samsung Pay will not be able to use NFC if the feature relies on a software-based Secure Element. Samsung plans to store payment tokens in the Trusted Executable Environment (TEE) on Samsung phones. The terms of Android M give Google control over permissions for TEE. Samsung Pay and Android Pay are competing for the same space and Google will push out Samsung Pay.
- Samsung Pay will not come preloaded on phones offered through the top three US carriers because they determine what is preloaded on the phones they sell. They entered into a partnership with Google when Google acquired Softcard and so they will not allow Samsung Pay to be preloaded, since the two payment features are competitors.
We contacted a number of people familiar with the matter within and outside of Samsung and based on the answers we received we’ve concluded that the assumptions behind the argument in the blog are inaccurate.
- Samsung Pay will be NFC-capable in the US and will use HCE (see report) with secure storage for tokens within the TEE on Samsung phones. Google will not manage permissions for TEE for Samsung phones using Android M.
- 3 of 4 major US carriers have already agreed to preload Samsung Pay on Samsung phones.
In fact, Will Graylin, Global Co-GM of Samsung Pay and CEO of LoopPay, went on to publically address these issues in a response to the blog post (see comment section).
Samsung Pay’s major advantage over Android Pay is ubiquity of acceptance. That ubiquity will be a key driver of habitual usage if Samsung can get people to load their payment data into the app. But it’s a big if. We expect that Samsung will make a significant effort to push adoption following the launch of the feature.
NEW DETAILS ON APPLE PAY FROM WWDC15: At its 2015 World Wide Developer Conference Apple revealed new details about its plans to develop Apple Pay and the product’s success thus far:
- Apple Pay will be accepted at 1 million US locations by next month — four times the amount at launch.What constitutes a location is unclear, however. Hundreds of thousands of vending machines are likely included in this statistic. As a point of reference, there are roughly 1.6 million retailer locations among US businesses with a payroll, according to the US Census Bureau. By most accounts, only a handful of those business have adopted the NFC payment terminals Apple Pay requires. Some of the brands currently accepting Apple Pay are included in the graphic below.
- iOS 9 will allow Apple Pay users to load store, rewards, and loyalty cards. When a user holds their phone to a reader in a store, Apple Pay will automatically bring up the appropriate card so that points can be applied before the transaction takes place.
- Apple Pay is coming to the UK in July. At launch over 250,000 locations will be able to accept Apple Pay and by fall 70% of credit and debit cards will be compatible with the feature.
- Apple’s digital wallet Passbook is being rebranded as “Wallet.”
Perhaps the most significant of these announcements is the reward and loyalty card experience. While Apple Pay has a good user experience, the user experience of plastic cards isn’t really a pain point for consumers. Apple also boasts a cutting-edge security framework, but the advantages are not easily communicable to consumers. That leaves the question of why someone would adopt Apple Pay. We think that rewards, offers, and points are a big part of the answer to that question. This functionality will help users save money and find deals more effectively because Apple Pay will automatically bring up the appropriate card. This overcomes two pain points: having to carry multiple rewards cards and remembering to use them.
VERIFONE SAYS MPOS IS CATCHING ON WITH LARGE BUSINESSES: Demand among medium- to large-sized businesses for mobile point-of-sale (mPOS) devices is growing, according to terminal manufacturer VeriFone’s second quarter earnings call. During the first half of 2015, orders of mPOS devices tripled VeriFone’s total orders over last year.
mPOS devices usually use a card reader that is plugged into a smartphone or a tablet. Growing adoption is partly due to a move by this retail segment to engage, upsell, and manage inventory, says VeriFone CEO Paul Galant.
- Many mPOS devices are portable. This means the devices can be brought to customers within the store for price checks and line-busting.
- One of the advantages of using mobile operating systems for mPOS devices is that the devices can integrate third-party apps that provide front- and back-office functions. In terms of front-office functions, merchants can opt to use loyalty and marketing apps to push offers to customers’ devices. Other apps serve back-office functions like keeping track of inventory.
Clothing retailer Chico’s is in the process of integrating VeriFone’s E Series mobile terminals at its 1,550 US and Canada locations, according to Galant. Specialty retailer J. Crew has also signed a contract to implement E-Series devices.
PINTEREST TAPS BRAINTREE FOR SOCIAL COMMERCE: Social media site Pinterest allows users to post or “pin” images to a digital bulletin board. There is an obvious commerce opportunity for Pinterest in that many of the images users pin are of products that can be purchased. Pinterest is in the process of introducing “Buyable Pins.” These pins will include a buy button for the product displayed in the image. This will allow users not only to discover products that they want, but to buy them directly from the site. Pinterest has tapped PayPal-owned Braintree to process Buyable Pin transactions and to manage credit-card data so that it remains outside of Pinterest’s environment. Braintree has consistently signed deals with hot startups, particularly in the mobile realm. Braintree is an important success for PayPal, which faces many unknowns as it approaches its late-2015 spinoff from eBay and is seeing increasing competition from the likes of Visa and Apple.
FACEBOOK AND SHOPIFY EXPAND SOCIAL COMMERCE PARTNERSHIP: For the last year, Facebook has been testing its “Buy Button” in partnership with e-commerce platform provider Shopify. A select group of Shopify merchants have had the opportunity to add the button to promoted and organic posts on Facebook, allowing Facebook users to buy items as they see them advertised in their Newsfeeds. Shopify announced yesterday that it will further expand the group of its merchants that can use the feature, referring to this stage of the rollout as a “beta test.”
What many of these social media companies intend to do is to create ‘walled gardens’ within the open internet — meaning that they will enact significant control over the content consumption of the people using their platforms. The advantage that some users may find in this approach is that content is curated according to the users’ tastes. It could also mean that customers discover products that they would like to buy more quickly and in greater volumes, which will benefit merchants.
If social commerce does take off with consumers it would have significant implications for gateway providers and processors. That’s because the social commerce experience aggregates sales across many different merchants to one platform. Instead of having to win the business of many different e-commerce companies, processors and gateways could gain significant volume by targeting a handful of social media companies.
MASTERCARD BATTLES BITCOIN: MasterCard is lobbying the UK government for increased regulation on Bitcoin companies, according to a letter to the UK Treasury obtained by CoinDesk. In the letter MasterCard argues that in comparison to its own network, transactions made through the Bitcoin network take longer to process, are more susceptible to hacks, and are only less expensive for merchants because the Bitcoin network doesn’t face the same regulatory burden. On one hand, all three of MasterCard’s points are valid. However, the Bitcoin network is not a systemically important network — from the standpoint of consumer protection, it’s less important that Bitcoin face the same regulations as other larger networks at this point. The Bitcoin network is also nascent and many of the flaws that it faces today will likely be overcome if it’s not stifled by regualtion. Finally, it could be argued the MasterCard intends to create a barrier to entry for competing networks through regulation — but the purpose of regulation is to protect consumers, not the competitive advantage of corporations. In May 2014, we previously reported on MasterCard’s US lobbying efforts with respect to Bitcoin.