Will This Deal Allow Samsung to Take on Apple Pay?

By Markets Fool.com

Mobile payment has been an unattainable holy grail of the smartphone industry.

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Apple has had some initial success with its Apple Pay technology, but that has not discouraged other competitors from redoubling their efforts in the space. One such company, Samsung , has acquired LoopPay, a mobile payments company, to ramp up its efforts to take on the iPhone maker.

"Our goal has always been to build the smartest, most secure, user-friendly mobile wallet experience, and we are delighted to welcome LoopPay to take us closer to this goal," JK Shin, Samsung co-CEO and head of the company's mobile business, said in a press release.

What is LoopPay?
Though it has yet to gain much traction, LoopPay offers add-on devices (phone cases and a stand-alone fob) which turn smartphones into mobile wallets using the existing magnetic strip readers in place at retail.

"LoopPay's technology has the potential to work in approximately 90% of existing point-of-sale (POS) terminals, according to internal research, with no investment in new infrastructure required by merchants," the company explained via the press release announcing the deal.

Apple Pay requires store to use POS terminals equipped with near-field communications chips.NFC technology allows information to pass from the phone to the POS when it is held close to a reader. In most cases, that means store owners have to upgrade their systems to use it, which can be a daunting prospect.

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NFC does allow for a simple touch to pay system, but adding it is an expense for stores and a bit of a hurdle for Apple.

A LoopPay case. Source: LoopPay.

LoopPay does not have that problem since it works with the credit card readers already in place.

"What's a real differentiator is this uses technology that's in stores today," said David Eun, executive vice president of Samsung's global innovation center, according to CNET. "We don't have to wait for a point in the future where there are a lot more [NFC-enabled] terminals. "

Essentially, Apple needs stores to install devices for a technology its user base is embracing, while Samsung needs its users to embrace a technology that stores are already equipped to accept.

This is a strong anti-Apple play
Owning LoopPay gives Samsung an already-established technology to offer with its phones.

"Through this deal, we can significantly accelerate our mobile commerce efforts," said Eun in the press release. "LoopPay's outstanding leaders and team have deep-rooted relationships with banks, card networks, and merchants that will complement those Samsung has established over the years."

Samsung has not commented as to whether it plans to use the existing LoopPay add-on devices or whether it will embed the technology in its phones. Eun also declined to tell CNET whether LoopPay would continue to support Apple products.

Will it work?
Apple has a devoted user base which has shown initial signs of embracing Apple Pay, but getting retailers to install the technology required to use it is a fight. The company has signed up hundreds of retail partners, includingMcDonald's,Macy's,Whole Foods, and the United States federal government. Still, the company has a long way to go before Apple Pay is widely accepted, and that should limit its usefulness to customers.

LoopPay will give Samsung a powerful tool to deliver its customers a mobile wallet -- one made even stronger if the company can find a way to integrate the technology into its phones without an external device. This deal does not place Samsung ahead of Apple, but it makes it a viable option and gives it a sexy mobile pay option to market.

To compete with Apple Pay, Samsung needs to move quickly to integrate LoopPay and explain its use to people who buy the company's phones. That's a daunting task, but it's neat, useful technology most retailers already accept.

That's a big part of the battle, which gives the company -- if it executes well -- a chance to own at least a piece of the mobile payment market.

The article Will This Deal Allow Samsung to Take on Apple Pay? originally appeared on Fool.com.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Daniel Kline owns shares of Apple. He has an iPhone but has not used mobile pay. The Motley Fool recommends Apple, McDonald's, and Whole Foods Market. The Motley Fool owns shares of Apple and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.