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Mobile Payment System Rumble: Apple Pay Vs. Samsung Pay Vs. Android Pay

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There has never been a more exciting time for mobile payments than now. Barely eking out transactions in 2013, mobile payments have boomed to a $50 billion market and is expected to grow to $142 billion in four years.

Thanks to Apple Pay, paying with smartphones is quickly becoming commonplace. However, Apple Pay is not the only mobile payments system available and it has its limitations, the most obvious being that only iPhone 6 and iPhone 6 Plus users can use it.

Longtime Apple rival Samsung, for one, has recently announced Samsung Pay, its own mobile payments solution unveiled during this year's Mobile World Congress. Samsung's announcement comes hot on the heels of Google revealing Android Pay and announcing that it purchased assets of Softcard, another mobile payments system initially established to rival Google Wallet. The latter came before Apple Pay but was never able to draw the popular response Apple has successfully elicited from its loyal base of customers.

Apple Pay and Samsung Pay are similar services targeted at consumers. Like Apple Pay, Samsung Pay supports NFC-enabled payments and is right now limited to the Samsung Galaxy S6. Samsung has not yet revealed all the details about its upcoming system, but it seems that Samsung Pay will use hardware-based security mechanisms similar to Apple's secure element to close off the user's credit card information from would-be hackers and spies. Users will also be able to authorize transactions using the fingerprint sensor on the Galaxy S6, but it appears the Samsung Pay process will include a couple more steps than Apple Pay, which simply requires customers to tap their iPhone on the terminal and touch their finger to the TouchID sensor.

The biggest difference between the two systems is that Samsung also supports point-of-sale terminals used for older magnetic strip credit cards by using a technology called magnetic secure transmission (MST), which generates magnetic fields to mimic credit card swipes. In the U.S., this probably won't make much difference as retailers hurry to comply with existing rules to change their PoS terminals to accommodate more secure chip-and-PIN credit cards. These new terminals will also support NFC, which means all retailers will have the required machinery needed to support Apple Pay before the year's end.

However, the story is different in developing countries, which has always been an advantage for Samsung. While developed nations are moving to chip-and-PIN technology, retailers in emerging markets are not likely to upgrade to NFC terminals since consumers still widely use the magnetic strip cards. While Apple Pay is supported by only 200,000 merchants in the U.S., Samsung claims that 30 million merchants will be able to accept Samsung Pay payments at launch. That is, of course, if their customers have a spanking new Samsung Galaxy S6 to pay for their purchases.

Samsung is banking on the success of its flagship smartphone for Samsung Pay to replicate the overnight success of Apple Pay. Just a few months after the launch of Apple Pay, Apple CEO Tim Cook says the system already accounts for two out of every three dollars made in contactless payments on American Express, Visa and MasterCard. That is largely due to the millions of customers who purchased the Apple Pay-enabled iPhone 6 and iPhone 6 Plus, which contributed to Apple's record-breaking profits posted during the latest quarter.

Samsung, on the other hand, had a bummer for its latest quarter, during which it saw its global market share dip by 5 percent, hounded by serious competition from Apple on the high end and Asian manufacturers such as Xiaomi, Lenovo, Huawei, and LG on the low end. A lot rides on Samsung's ability to sell its newest smartphone well for Samsung Pay to become an accepted Android mobile payments system.

However, Samsung Pay is not the only solution for Android. Google has been in the market for a long time, far longer than Apple. Recently, Google announced Android Pay, an application programming interface that allows developers to create a payment platform for their apps. Android Pay is not a direct competitor to Samsung Pay and Apple Pay, but discussing Android Pay is not complete without mentioning Google Wallet.

Google Wallet is Google's mobile payments solution for consumers and uses NFC to allow customers to pay for goods online and at stores. Part of the reason it never gained traction prior to Apple Pay is the reluctance of mobile carriers to allow Google Wallet on the smartphones they sell because they have their own mobile payments system, originally given the unfortunate name of Isis before it was renamed Softcard.

Softcard, however, was never adopted enough to become a contender and, ironically, recently sold its assets to Google, which will be incorporating these technologies in Google Wallet. Verizon, AT&T and T-Mobile will also be pre-installing the Google Wallet app in their smartphones as part of the partnership, meaning Samsung Pay has some serious competition when it comes which Android mobile payments system will dominate.

Meanwhile, Apple Pay, Samsung Pay, Android Pay and Google Wallet are not the only mobile payments system available. Retailers themselves are developing their own brands of mobile payment apps following the success of the Starbucks app, which has 12 million users to date. It's a market that PayPal, as can be seen from its purchase of Paydiant, is going after by providing retailers a platform to create a digital payments solution customized to its own business model and customers. There are also plenty of other solutions that are not dependent on smartphones, such as Alipay, Amazon and Visa Checkout, which means the three handset-specific solutions are not the only options available for consumers.

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