The mobile wallet battle is quickly becoming an explosive one. Just last week, Samsung Elect Ltd(F) (OTCMKTS:SSNLF) bought LoopPay, a mobile payment technology that may show up in the upcoming Galaxy S6. The White House offered up a huge vote of confidence in Apple Inc. (NASDAQ:AAPL) when it announced the U.S. government will begin supporting Apple Pay. And in the background, Google (NASDAQ:GOOG,NASDAQ:GOOGL) has reportedly been working with mobile carriers, banks and device manufacturers on a new version of Google Wallet that’s set for a May debut.
The stage is set for 2015 to be the year mobile payment takes off in a big way, but which of the high tech giants now duking it out is going to come out on top?
GOOG had the early start (Google Wallet launched in 2011). Apple Pay has momentum and now the U.S. government supporting it. Samsung will be launching the Galaxy S6 in a few days — it’s expected to be the hottest Android smartphone of the year — and if it incorporates the proven LoopPay technology as expected, that release could be a one-two mobile payment punch.
What’s the Scoop About LoopPay?
Founded in 2012, LoopPay is one of those dozens of mobile payment solutions scrambling for acceptance over the past few years.
However, Loop has a big technological advantage over competing schemes: it uses the existing magnetic stripe readers used to swipe credit cards and debit cards. That means no new terminals required for retailers who choose to accept LoopPay. According to Loop, that works out to 90% of merchants in the U.S. being able to accept payment by LoopPay without investing in any new point of sale terminals.
There’s a catch, though.
Smartphones use NFC radios to communicate with those new mobile wallet readers, but they don’t have magnetic transmitters.
LoopPay’s Achilles Heel has been that smartphone owners must carry a key fob, or slip their device into a case with a LoopPay card embedded. That’s an ugly solution.
With its purchase of LoopPay and the Galaxy S6 launch, Samsung has the opportunity to come out swinging against Apple, the iPhone and Apple Pay. The possibility of a Galaxy S6 that incorporates LoopPay technology makes the situation a lot more interesting.
At the moment, LoopPay also works with iPhones. New owner Samsung has a decision to make. It can kill that iPhone support — why help a competitor? — or, it could continue to support iPhones and promote its new mobile payment system as being device-agnostic (albeit with a specially-equipped case or key fob required), unlike Apple Pay which is exclusive to iPhones. That could prove the better choice in the long run.
Whichever route Samsung opts for, I suspect Apple isn’t overly alarmed at this point.
Apple Pay has seen impressive uptake. It’s now accepted in 220,000 stores and supported by a long list of major credit and debit card providers with hundreds more committed to come on board. The new U.S Government deal means those receiving government benefits as well as federal government employees can use Apple Pay. According to PYMNTS.com, that covers 9 million Federal payment cards and yearly transaction volume of $26.4 billion.
The Real Fight Will be Google Wallet vs LoopPay
Android dominates smartphone sales worldwide (to the tune of an 83% market share), but in the U.S., where the mobile wallet battle is primarily being fought, the numbers aren’t so rosy for Google.
Here, Apple iPhones slightly edged Android smartphones in Q4 sales. The popularity of the iPhone means Apple Pay support makes sense for retailers. After Apple, the second-place vendor in the U.S. was Samsung, which accounted for over half of U.S. Android smartphones sold in the quarter — despite the disappointment of the Galaxy S5.
Samsung is already well known for shipping smartphones that feature its own apps and services in place of the default Google versions included in Android. If Samsung decides to adopt LoopPay with the Galaxy S6, it goes without saying that Google Wallet will be buried on what is expected to be the best-selling Android smartphone of 2015.
That would put carriers like AT&T Inc. (NYSE:T) in an awkward position.
Google wants them to feature Google Wallet on smartphones they sell. For the carriers, the idea is tempting. They get zero cut of the Apple Pay service that threatens to become the de facto mobile payment system, while their own efforts to create a standard have failed to catch on. But Samsung — their biggest vendor outside of Apple — will be putting pressure on them to support LoopPay instead. Samsung won’t be happy if AT&T decides to pre-load Google Wallet on the Galaxy S6.
Google also has to convince the other Android smartphone makers like LG and HTC to come on board, and that can be like herding cats.
How is this all going to shake out?
By the end of 2015, I expect to see Apple Pay in an even more dominant position for mobile payment in the U.S., with other markets like Canada, Europe and China beginning to gain steam. Meanwhile Google Wallet and Samsung’s LoopPay will be duking it out for a distant second place. If the Galaxy S6 does arrive with LoopPay support, give Samsung the edge. Either way, add mobile payments to the growing list of areas where these two Android giants are clashing.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.