Late last year, rumors began swirling that Samsung Electronics was eyeing its own smartphone-based payment technology to compete with Apple Pay. The speculation came to an end Wednesday with the news that South Korea-based Samsung would be acquiring a U.S. startup called LoopPay.
Founded in 2012, the Boston-based LoopPay enables mobile phone-based payments through an app used in conjunction with an add-on fob or other device. Its Magnetic Secure Transmission technology "turns any existing mag stripe readers into mobile contactless readers," according to the company.
Samsung said the acquisition is aimed at strengthening its "overall efforts to provide users with seamless, safe, and reliable mobile wallet solutions." LoopPay CEO and co-founder Will Graylin said his company will continue operating as an independent team and wholly owned subsidiary of Samsung Electronics America Inc. Further terms of the sale were not released.
Race for Retailer Adoption
The LoopPay acquisition provides Samsung with a tested and ready-to-use technology that could compete with Apple's mobile payment system. Apple Pay, launched in October, uses Touch ID to enable contactless payments with the iPhone 6, iPhone 6 Plus, iPad Air 2, iPad mini 3 and -- soon -- Apple Watch.
One hurdle to the widespread adoption of Apple Pay is the fact that most existing point-of-sale (PoS) devices used by retailers do not yet support the technology. LoopPay, on the other hand, said its system can work with some 90 percent of current PoS terminals.
As of January, Apple Pay was accepted at around 220,000 retail outlets in the U.S., including Macy's, Radio Shack and Subway. By contrast, in November LoopPay said that its users could make mobile payments at more than 10 million merchant locations across the U.S.
Taking LoopPay Partnership to the Next Level
Samsung's relationship with LoopPay extends back to when its Global Innovation Center, which works with startup companies and entrepreneurs, first invested in the Boston firm. That investment, also backed by Visa and Synchrony Financial, helped LoopPay develop its Magnetic Secure Transmission technology.
"We are excited to take our relationship with LoopPay to the next level," said David Eun, Executive Vice President of Samsung's Global Innovation Center, which has offices in the U.S. and South Korea. The acquisition will help Samsung significantly accelerate its mobile commerce efforts, he said.
Graylin hinted at a deeper relationship with Samsung during a news interview last year in which he said his company's payment technology would be added to a smartphone with massive penetration sometime in 2015.
Samsung did not immediately respond to requests for further details about the LoopPay deal. However, a Wednesday report in the Wall Street Journal indicated Samsung would roll out the LoopPay service later this month when it unveiled its new Galaxy S6 phone.