Will Samsung Pay Waive Merchant Fees In The US?

Samsung won’t be charging anyone for Samsung Pay when it rolls out the mobile payment service in Korea — not card issuing banks and not payment processors, Business Korea reported on Monday (March 9).

That could set the stage for a fee-free U.S. version of the service, which Samsung is expected to launch this summer. The move could give Samsung Pay a much better chance to get partners on board in the payments chain for its service. Apple’s highly visible Apple Pay, which will be Samsung’s chief mobile payments competition, reportedly charges banks 15 basis points for credit transactions and a half-cent for debit transactions.

The no-fee approach also means that Samsung would have to come up with a different profit model for mobile payments. “Samsung Pay’s profit model could include ads in the commercial market by issuing coupons or gift cards,” Samsung Pay VP Lee In-jong suggested at a press event.

Going after market share instead of early profitability would also play to Samsung Pay’s technical approach. While Apple Pay uses the iPhone 6 or Apple Watch’s NFC chip to connect with contactless point-of-sale terminals — which still represent only a small fraction of all retail payment terminals in the U.S. — Samsung Pay supports NFC for contactless payments and LoopPay to mimic a traditional magnetic-stripe payment card, as well as bar code-based payment systems.

That combination would cover virtually all retail point-of-sale systems, although Samsung would still have to interest users in making payments with its phones. Samsung will also have to get the cooperation of issuing banks to get cards live on the system and to support virtualization for its transactions. On the other hand, both Visa and MasterCard have already endorsed Samsung Pay.

If Samsung does forgo fees in the U.S. and its kitchen-sink tech approach works, the largest Android smartphone maker could also define how much other Android players, including Google, could charge for mobile payments.