Samsung is not worried about competition from other mobile payment apps in South Africa, including platform-linked services such as Huawei Pay and Apple Pay.
Huawei recently revealed that it expects to launch its mobile payments service in early 2019, saying that it will support contactless near field communications (NFC) technology and QR codes.
It is also working on integrating “a few other mechanisms” for making payments, Huawei said.
The project lead for Samsung Pay in South Africa, Philip Henning, said at a recent media briefing that they were first to market in South Africa, so the increased competition from next year does not concern them.
While Samsung laid the foundation for other platforms to come into South Africa in many ways, there is still a lot of work that Samsung Pay’s competitors will have to do.
“Any product that comes into market, there’s a lot of work for them to do that we had to do over three years,” said Henning.
He explained that contenders will be able to build on Samsung’s groundwork with the tokenisation systems of Visa and Mastercard, but they still need to do the necessary integrations.
They will also need to go through the same approvals process with the Payments Association of South Africa (PASA).
PASA told MyBroadband earlier this year that Samsung had extensive discussions with it over the course of at least two years, which included checks on the use of biometrics as a form of cardholder verification.
“The big question for us was whether there would be any changes to the existing rules we have in place for card payments,” said PASA CEO Walter Volker.
PASA ultimately found that Samsung Pay was an innovative implementation of existing technologies.
Since it runs on the back of the “card rails” — the existing card payments system from Visa and Mastercard — PASA could simply evaluate it in terms of the rules it already had in place.
Samsung’s secret weapon – Magnetic Secure Transmission
The big differentiator for Samsung, however, is a technology that it calls Magnetic Secure Transmission (MST).
This effectively allows phones that support Samsung Pay to make contactless payments at nearly any card machine in South Africa – even ones that do not have NFC.
NFC is the technology that banks are integrating into cards, which enables “tap-and-go” payments on supported terminals.
However, fewer than 50% of card terminals in South Africa support NFC, Henning said.
While PASA, the banks, Mastercard, and Visa are driving contactless technology aggressively, it will still be awhile before NFC is widely adopted at stores and restaurants.
This gives Samsung an early advantage in the market, as MST will allow its mobile payments app to work in over 90% of cases. It does this by emulating the magnetic stripe of a bank card being swiped through a payment terminal.
Samsung is also dominant in South Africa’s premium smartphone market, where this technology is used, Henning said.
“Thanks to MST, Samsung Pay doesn’t really have any direct competition.”