Has Samsung just beaten Apple at mobile payments?

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One of the most interesting new announcements to come out of Samsung’s Mobile World Congress presentation yesterday was the announcement of “Samsung Pay” – a service that will let you pay for stuff with your phone, to compete primarily with Apple Pay.

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Apple Pay launched at the end of last year in the US, and is set to launch later this year in the UK – but whilst clearly being a very slick technology, has had limited uptake. The reason is that it uses NFC payments, which require shops (or “merchants”, in credit card speak) to have NFC reading payment terminals. Whilst this is increasingly common, it isn’t quite ubiquitous yet.

Samsung Pay, meanwhile uses a new technology to work with something much older – the magnetic stripe. The stripe, and magnetic stripe readers are still found all over the world – as compatibility reasons mean that stripes are still found on chip & pin readers, and even NFC readers.

The Galaxy S6 has a special “MST” chip built into it, which essentially tricks the card reader into thinking there’s a credit card with a magnetic stripe in the machine – by manipulating magnetic fields to match what a card would say if it were swiped. So all you have to do is hold your phone to the side of a magnetic stripe reader, and your goods will be paid for.

The only real question is just how much explaining to the shopkeeper you’ll have to do when your payment goes through without a card.

So this gives Samsung an immediate advantage over Apple Pay, in terms of the merchants that support the technology. But this is where things get even more interesting.

One of the big hurdles for Apple Pay so far has been that retailers aren’t very happy with it. The technology marks a big landgrab by Apple for a slice of payment market, and so a number of big American stores have banded together to stop accepting Apple Pay – hoping to force users onto their own rival payment platform instead. The problem for Apple isn’t just that say, Walmart, won’t take Apple Pay – its that it makes the platform less ubiquitous. iPhone owners can pay with their phone… but they should probably take their wallet with them to, just in case the shop won’t take Apple Pay.

Meanwhile, Samsung seems to have subverted this system. By simulating a magnetic stripe, as far as I can tell, there’s no real way that payments from Samsung Pay can be denied – as to the card reader, it is just another magnetic stripe.

Even if there is a way to block Samsung payments like the retailers have done with Apple Pay, Samsung will still ultimately have its advantage in terms of sheer number of merchants.

So despite the iPhone being the juggernaut that it is, could this be one area where Samsung will end up besting Apple? Will it include the technology in future devices like the inevitable Galaxy Note 5 (probably, yes), and will it open up the tech to other manufacturers to make Samsung Pay available on every Android phone? (Probably not).

It’ll be interesting to see what happens.

James O’Malley