Samsung seeks mobile payments spark
In a new Samsung Electronics ad, a mysterious monk strides through a supermarket to a hip-hop beat using his staff to wizard groceries into a cart. At the checkout, an acolyte whips out a smartphone to settle up using Samsung's new mobile payment system, as if by magic.
The tongue-in-cheek nod to martial arts movies is a plug for Samsung Pay, a technology to be rolled out in the US later this month that allows customers to pay for goods by simply placing their handsets on or next to a point-of-sale terminal.
Since its 20 August launch in South Korea, Samsung says the service is beating internal expectations by averaging 25 000 new users and more than $620 000 in transactions per day.
The world's top smartphone maker is trying to push into mobile payments, a sector seen by researcher IDC as being worth $1 trillion in 2017, as part of a drive to stem market share losses to Apple, Huawei Technologies and Xiaomi.
Gartner says Samsung's global smartphone market share fell to 21.9% in April to June from 26.2% a year earlier.
Samsung executive VP Rhee In-jong said in an interview the firm will likely launch new mid- and low-tier smartphones compatible with Samsung Pay next year. "The way to protect pricing power, even for low-end or mid-range phones, is to offer a service that users can't get elsewhere," he said.
The firm hopes the new service will set its phones apart from competing devices and compel users to pay a bit more for the universal convenience it offers. But with Apple already offering payments and others like Google preparing to launch Android Pay, some analysts say Samsung's relatively late entry and weaker software ecosystem pose challenges.
"Samsung Pay is a necessary step in the right direction but it doesn't guarantee increased sales of smartphones for the company," said IDC analyst Shiv Putcha.
Apple and Google did not respond to requests for comment on how they perceive Samsung's mobile pay services.
Building a base
Samsung has declined to disclose its overall investment in launching Samsung Pay, which follows the February acquisition of mobile payments start-up LoopPay for $230 million.
Samsung's system offers wider coverage than rivals because it allows users to make payments by putting their phone on, or near, magnetic stripe card readers already in wide use. It has signed up credit card firms and banks such as Visa, MasterCard and Chase as partners.
By comparison, Apple Pay, launched last September, requires retailers to install new equipment compatible with its service.
Cho Min-kyung, a Seoul office worker who recently tried out Samsung Pay through her Galaxy S6 phone, said the service was convenient because it cuts out the hassle of having to carry around both her wallet and phone every time she heads out.
In a research report, brokerage SK Securities said Samsung Pay may be helping shipments. Estimated South Korea sales of Galaxy Note 5 and Galaxy S6 Edge+ devices - which support Samsung Pay - for the first three days after launch were more than double comparable sales of the Note 4 and Note Edge handsets last year.
Samsung executive Rhee declined to give targets on Samsung Pay, though he said the company, for now, was focused on adding new users, rather than making money. Samsung's Gear S2 smartwatches, which go on sale in October, are also compatible with Samsung Pay.
The service will expand to China and countries in Europe and Latin America, and Rhee said Samsung is considering additional measures such as online payments to further beef up the service. Beyond Samsung Pay, he said the firm will increase investment and acquisitions to bolster software and services.
"We're looking at every company that could give some new element of differentiation for our devices," Rhee said.