Samsung Pay Makes the Same Mistakes as Google

Advertisement

Samsung is trying to copy the success of Apple’s (AAPL) Apple Pay with its recently launched Samsung Pay service in the U.S. However, a recent history lesson involving Google’s (GOOGGOOGL) former Google Wallet, Softcard and Apple Pay suggests that Samsung’s entrance into the U.S. will be short-lived.

Samsung Pay Makes the Same Mistakes as GoogleIf Samsung had any sense at all, it would have resisted the urge to launch its own payment technology and embrace the new Android Pay from Google.

The reason is because Samsung Pay is very likely to encounter the same problems as Google did with Google Wallet.

History Is Not on Samsung’s Side

Prior to Google’s launch of Android Pay, it was trying desperately to succeed with something called Google Wallet, which was very similar to both Apple Pay and Android Pay. The problem for Google Wallet was that U.S. carriers would not support the technology.

Back in 2010, several of the largest U.S. wireless carriers partnered to develop and market Softcard, which was their mobile payment processing product. So, carriers refused to support Google Wallet in support of their own technology.

Then, earlier this year Google partnered with Softcard and agreed to buy technology from U.S. carriers associated with Softcard and mobile payments. This move paved the way for Android Pay, as Google built an army of one million retail locations, as well as the customers and carriers to support the technology.

The problem for Google Wallet was that it lacked leverage over the carriers. Sure, GOOG owned the Android operating system, but besides Nexus, Google did not own the best-selling hardware for those carriers. Therefore, Google needed the support of carriers.

Meanwhile, Apple never needed carriers on its side for Apple Pay to be a success. In essence, Apple knew that carriers would support the technology regardless of what they wanted.

Unlike Google, Apple owns both the software with iOS and the hardware with the iPhones, giving it a tremendous amount of leverage over carriers, retailers and consumers. Google did not possess such leverage, needing both hardware makers and carriers on board with Google Wallet.

With that said, Samsung Pay is much more like Google Wallet than Android Pay or Apple Pay. In Samsung’s press release, it noted that all of the nationwide wireless carriers, excluding Verizon (VZ), would support the technology, and that it would be sold with the Galaxy S6, S6 Edge, and S6 Edge+. Samsung likely believes that adding Samsung Pay with these three popular devices will give it all the leverage it needs.

However, investors should keep in mind that Google Wallet was first accepted by carriers before being blocked in favor of Softcard. The same could very well happen to Samsung as carriers promote Android Pay and Apple Pay. Furthermore, Samsung relies on Android to operate, and while Google may not charge Samsung to use its operating system, it still has certain requirements in place like preloaded apps that the hardware manufacturers must adhere to.

So, I’m puzzled by the notion that Google will be OK with Samsung marketing its own payment processing technology when Google has spent time and money to develop Android Pay. In other words, don’t be surprised if Google’s Android operating system doesn’t support Samsung Pay for too long; and since Samsung has no other operating system in its back pocket, it must bow to the rules that Google implements.

The bottom line is that Samsung Pay won’t pose a threat to Apple Pay or Android Pay. It may linger around for a little while, but like Google Wallet it is highly unlikely that it will ever gain momentum with carriers, consumers and Google.

Due to the many puzzle pieces needed in place for a mobile payment service to succeed, it is more than likely that Android Pay and Apple Pay will be the only relevant mobile payment services in the U.S., and will later evolve and challenge the likes of Visa (V) and Mastercard (MA) in the payment processing space.

Unfortunately for Samsung, its own pay service will never have that chance.

As of this writing, Brian Nichols was long AAPL.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2015/10/samsung-pay-google-wallet-apple-pay/.

©2024 InvestorPlace Media, LLC