Samsung Pay: From Mobile Payment Method To Commerce Enabler

Two years ago, when Samsung Pay entered the mobile payments scene, it did what Apple and Android a year before it had not: It made mobile payment capabilities at the physical point of sale (POS) more or less ubiquitous right out of the gate.

This new digital way to pay was made possible via technology that Samsung acquired, called “magnetic secure transmission” — MST — the very same technology that enables merchant point-of-sale terminals to accept a mag stripe card for payment. Old technology, some remarked, since the mag stripe is what everyone in payments is looking to replace.

But it was this old-school technology that gave Samsung Pay its edge, said Sang Ahn, Samsung Pay, Inc.’s VP and GM for the U.S. Mag stripe at the point of sale may be an existing technology, but it is ubiquitous at every POS terminal and, when coupled with a mobile phone and a secure token, becomes an elegant and scalable way to pass payments to merchants.

So, out of the gate, Samsung Pay could be used securely at any retailer that accepted mag stripe cards — which is mostly all of them even in the day of chip cards. That, Ahn said, made something on the order of 10 million merchants throughout the U.S. capable of accepting Samsung Pay instantly, without having to do anything different at their points of sale.

Ahn said that technology edge eliminated what Samsung thought at the time was one of the biggest impediments to in-store mobile payments stumbling blocks: getting merchant acceptance.

It did, and it didn’t.

From Zero to 1,500

Today, Ahn said, while U.S. retailers can accept Samsung Pay without changes to their POS, Samsung quickly learned that just having Samsung Pay work without any technical involvement wasn’t enough to get merchants focused on the value of enabling its digital wallet. Merchants, banks and wallets Ahn said, needed to actively educate consumers at the point of sale so that they could use their Samsung Pay wallets to pay at the places they liked to shop. When they did, they saw usage spike.

But merchants without consumer adoption does not a mobile payments ignition strategy make. That’s where Ahn said Samsung Pay’s more than 1,500 U.S. banks and financial institution (FI) partnerships have played a big role. Partnering with banks helped to establish trust between the consumer, Samsung Pay and the FI — who helped educate the consumer on how and where to use their card in their Samsung Pay wallet.

Provisioning an issuer’s card to the Samsung Pay wallet also checked off another important box, Ahn said: security. Working with the card networks, Samsung Pay could tokenize account credentials registered to their wallet, giving everyone the peace of mind that the card provisioned to the wallet belonged to the owner of the wallet and that she was authorized to use it.

Yet both Ahn and Samsung Electronics’ VP and GM of Services & New Business, Nana Murugesan, agree that ease of use, ubiquity and even letting a consumer know she can use her phone and Samsung Pay wallet to pay haven’t been enough to convince U.S. consumers to try a new method of payment in-store. Not when the old method wasn’t broken.

Most mobile wallet providers have learned that breaking an old habit to adopt a new one is harder than anticipated, particularly when consumers aren’t clear on the benefits of trying something new.

It’s a lesson, Murugesan acknowledged, that all digital wallets — not just Samsung Pay — have learned, painfully, over the last two years.

“At first, we asked, ‘How do we convert people from using plastic to using our service?’” Murugesan said. “But now we have learned that that approach is not going to break through. What we need to do is look at the entire commerce journey from pre-purchase through post-purchase and ask how we can improve that.”

Moving the Goalposts

That, Ahn and Murugesan said, drove Samsung Pay’s collective “aha” moment — evolving over the last year from a mobile payments option among many to what he calls a “holistic mobile wallet,” with value added for both the consumer and the merchant.

That, Ahn said, means adding incentives and offers that influence a consumer’s shopping habits at the top of the funnel — long before she reaches the point of sale or even leaves home to go to the store. Offers and deals and rewards have been among Samsung Pay’s first initiatives to influence consumers — programs that Samsung Pay has been rolling out steadily over the last 18 months. Online checkout is another of Samsung Pay’s next big milestones, with key partnerships in the offing that will make that a reality very soon, Ahn said.

But the longer-term opportunity that Samsung is strongly positioned to address, Ahn said, is to be able to meet consumers wherever they are, and with whatever device they happen to be using: a smartphone, a desktop computer, a TV, an appliance or a wearable, allowing commerce to flow from those intelligent and connected devices. With consumers, Ahn said, “Samsung needs to create better end-to-end commerce experiences, which includes helping users discover new goods, shop in-store and online with ease and more value and, at the end, enable fast and frictionless payments.” By doing so, Ahn said, Samsung improves the commerce loop in any context the consumer is in — something he and the Samsung team believe will motivate consumers and pull through value for the rest of the commerce ecosystem.

It’s also where Murugesan said that Samsung Pay has an edge. The combination of software, services and devices — the collective ecosystem of commerce — positions Samsung and Samsung Pay as a key player in powering this end-to-end approach to commerce.

Building on a Hardware/Software Foundation

Three years ago, Murugesan said, no one would have imagined talking to a virtual assistant and expecting that they’d be able to do their shopping. Today, it’s no longer a pipe dream. Murugesan said that is just the tip of the commerce iceberg. Voice and visuals, together, can give commerce new context and a way for consumers to discover and then buy the things that they see anywhere — not just online, not just in a store and not just in a mobile app.

Murugesan said that consumers today are accustomed to taking pictures of the things they see and the things they like. In fact, the average person takes roughly 3,700 pictures a year. But suppose, he asked, if a consumer knew that taking a picture of an item that they saw and liked could point them to a place where that item — or one just like it — could be purchased? Or if that same consumer wanted to know where to buy one of Ray Donovan’s (Liev Schreiber) fancy watches but had nothing but an image on a TV screen to start with and then an endless search on the web to find?

Samsung wants to take those emerging commerce workflows, make them seamless and power a commerce opportunity for that consumer, Murugesan said. The benefit to the consumer is obvious, but so too is the benefit to merchants and brands: The demand for their products comes from a discovery made by a consumer in the context of doing something else, instead of merchants and brands trying to force demand on a consumer who’s probably not paying attention.

Visual and voice searching as well as cross-platform commerce are major priorities for Samsung Pay, said Murugesan.

Commerce innovations via visuals are not only focused on driving a transaction. Samsung is also leveraging its visual software innovation to authenticate consumers. Samsung’s Face ID authentication method is the first major eWallet to do so and was rolled out with its Galaxy S8 smartphone in April.

What’s Next?

Partnering with financial institutions and merchants to make the shopping experience more experiential, Ahn said, will continue to be a cornerstone of Samsung’s strategy going forward for all FIs, consumers and merchants. For Samsung Pay, Murugesan said that includes powering all of a consumer’s transactions across all today’s shopping channels — online, mobile and in a physical store — and the contextual channels that will emerge with visual and voice.

It also means having more of a focus on the “long tail” of retailers, those many, many smaller merchants who may not yet realize their POS terminal can accept Samsung Pay. In aggregate, Ahn said that those small retailers make up a bigger chunk of the industry than some of the heavyweights. Educating them is a priority.

So, too, is a full integration with other Samsung hardware, software and services, where Samsung Pay’s “holistic” wallet will be integrated within more and more of the company’s own smartphones and connected devices.

Murugesan added that users of Samsung Health, Samsung Billing, Samsung Internet and other Samsung products represent untapped opportunities for the company to evangelize Samsung Pay and to expand its commerce loop into areas of a consumer’s life that well go beyond retail commerce.

“We’ve come such a long way in the last two years and have learned so much. In many ways, we’re really just getting started,” Murugesan said.