Deconstructing Samsung Pay: A month with the future of payments, its challenges and opportunities

Samsung Pay tries to be a unified payment service for India. Has the company set its sight on a goal too lofty?

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Exactly a month back, Samsung India announced that their contactless payment service, Samsung Pay, was going live in the country. While initially Samsung announced that the service would work with a total of eight devices — a limited number given the Korean company’s smartphone portfolio in India — with the availability of the Samsung Galaxy S8 and the Galaxy S8+ in May the number will go up to 10.

The Journey to bringing Samsung Pay to India started a little over a year ago in a meeting room at the Samsung India office. Asim Warsi, Senior Vice-President (Mobile Business), Samsung India Electronics Pvt. Ltd tells us that the goal was to bring in the service with a clear Indian context, ensuring it would truly add value to those who use it. Towards this, Samsung India worked with various banking partners and regulators to ensure that debit cards would also be integrated into S-Pay –credit card penetration is still limited in India.

Studying consumer behaviour over time, Warsi said, Samsung India realised that “people were concerned about mobile payments being too hi-tech or complicated, or that they would wonder if their money is safe being transacted through the world-wide web.” Samsung also saw a clear opportunity in the existing fragmentation in modes of payment into mobile wallets, debit/credit cards, and cash. Soon Samsung India realised that “Samsung Pay in its current global, mostly Credit Card only form was not going to be the most pervasive case for consumers,” added Warsi.

What Works and What does not
India is not a credit card market — in March 2016, there were just 24.51 million credit cards against 661.8 million debit cards, according to the Reserve Bank of India. And this was before demonetisation propelled mobile wallets, particularly PayTM, to the forefront of digital payments. Samsung Pay supports debit and credit cards issued by the eight most popular banks, up to two PayTM accounts and payments via the UPI platform which allows fund transfer to and from most bank accounts. Interestingly, India has the largest bouquet of services integrated into Samsung Pay anywhere in the world. But online payments through smartphones are supported only in South Korea, which is a huge let-down. Also, if your phone’s battery is below 10 percent, Samsung Pay would not work.

Samsung Pay supports most Mastercard, Visa and America Express debit & credit cards, along with PayTM and UPI
Samsung Pay supports most Mastercard, Visa and America Express debit & credit cards, along with PayTM and UPI

Set up and Get Going
Adding debit and credit cards to Samsung Pay is incredibly easy. Once you’ve tied the service to your Samsung account, just click on “add a card” and align your debit/credit card with the overlay on the screen. The camera reads the card information, after which you must enter your CVV. Once that is done, Samsung Pay validates your card with the bank before allowing transactions. To make a payment, all you have to do is swipe upwards on any screen (even the lock screen), provide your fingerprint and then put the phone next to the POS machine. From there on, the machine takes over and you won’t need your phone.

PayTM payments through Samsung Pay are as easy as you've come to expect them to be.
PayTM payments through Samsung Pay are as easy as you’ve come to expect them to be.

Breaking Down the Process
There’s a lot happening behind the scenes with the S-Pay service. First, how does the phone connect to the POS machine? Well, it can do so either via NFC (the same way Android Pay and Apple Pay do) OR, it can do so via Magnetic Secure Transmission or MST for short. MST essentially works by generating a magnetic field around the phone that simulates your card’s magnetic strip. The POS machine reads this magnetic field and assumes a card has been swiped, initiating the transaction process.

We have already seen card machines from Pine Labs tout Samsung Pay stickers in Noida for instance. Several credit and debit cards are already utilizing this platform, but Samsung Pay is the first service to really bring everything under one umbrella for Indian customers.

Also Read: Samsung Pay in India now supports UPI payments

The inclusion of MST is what sets Samsung Pay apart from Android Pay and Apple Pay because this ensures S-Pay works across at any merchant site which accepts cards, without the merchant having to install any additional hardware. You’re still required to enter a pin to authenticate the payment as required by RBI.

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Putting Security First
Asked how Samsung was keeping card information secure, Warsi underlined the three-layers of security in place to prevent misuse or fraud. First and foremost, Samsung Pay cannot be initiated without biometric authentication. Therefore, in the event your phone is stolen, the thief cannot use Samsung Pay. The second protection measure is tokenization where instead of transmitting card details, the phone sends a “token” associated with it, which can only be decrypted by Mastercard or Visa at their end. Therefore, at no point is your credit or debit card information being transmitted or recorded. And finally, the Samsung Knox security platform, where all the sensitive information is stored, inaccessible to users in raw data form.

The First Transaction
I decided to use the service as exclusively as possible for a month, to see whether Samsung had covered all its bases in terms of addressing the needs of the consumer. However, embarking on this challenge to use Samsung Pay for all transactions, instead of card or cash, has resulted in some of the most unique, hilarious and even downright embarrassing moments.

My first time trying out Samsung Pay, I was nervous and excited. I was also worried whether the cashier at the petrol pump would be open to the idea. Once the car was fueled up and the cashier asked how I was going to pay, I flashed my phone. Here’s where it got interesting. He asked “PayTM?” It was difficult to explain that I was going to use my phone to pay through my card. Overcoming his reluctance, once he did hand me the POS machine, it was literally as simple as it had been explained to be. The cashier still had to enter the amount and I still had to enter my PIN to authenticate the payment. Incidentally, every time I pulled out my phone to make a payment, every merchant assumed it was a PayTM transaction. That underlines the challenge ahead for Samsung.

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While it has worked virtually everywhere, despite multiple tries, the POS machine at my favourite ice-cream parlour kept saying “present card” followed by killing the transaction. Barring this one odd exception, Samsung Pay has worked for me across multiple petrol stations, convenient stores, medical stores, restaurants, bars, airports, coffee shops and even the smallest of grocery stores.

A global service with local challenges
Before leaving for a recent trip to Thailand, the fact that Thailand was on the list of countries that support Samsung-Pay contributed heavily to me choosing the Samsung Galaxy S7 edge over the Google Pixel as my travel companion. Sadly, every vendor I tried to pay off using S-Pay, including the Duty-Free shop at the Suvarnabhumi Airport, declined to accept S-Pay and insisted I use a physical card instead. Samsung Pay is available across 14 countries, but whether the merchants will accept it or not depends on socio-cultural factors. If you’re traveling abroad, it is strongly recommended this isn’t your only payment option.

A unified payment platform with serious challenges ahead
Samsung Pay has the potential to be the one-stop solution for all forms of digital payments, but the lack of integration with online payments is a serious shortcoming. Both Apple and Google have taken care of this first hand, enabling online payments through their secure payment platforms. Warsi had no clear answer on when this feature would make its way into India.

Samsung Pay was initially limited to Samsung smartphones that cost more than Rs 20,000. But given the ferocity with which sub-20K smartphones outsell those in the premium range, the audience and hence the market for S-Pay gets greatly limited. Warsi did mention that depending on the demand for S-Pay, the company could consider bringing the service to cheaper smartphone in the future, but for the moment, it remains a service accessible only to the affluent. Samsung Pay’s market base will continue to be severely limited until the time the technology is baked into a wider segment of phones, especially in the lower price brackets. For now, it remains a versatile means of payments with limited scope.