Mobile payment users are still in short supply, and the growing range of options may be seen as too chaotic for consumers who haven't yet used a mobile wallet.
The latest moves by consumer electronics giants Samsung and LG add to a growing sense of confusion in the nascent market for handset-driven payments, analysts say.
South Korea-based LG Mobile will soon launch LG Pay, with the initial local support of credit card issuers Kookmin Card and Shinhan Card, LG said in a Nov. 18 announcement on its Facebook page. The company provided few specifics, but LG Pay reportedly operates by linking an LG handset via Bluetooth technology to a proprietary card that stores all of a user's payment and loyalty cards, making the service compatible with all of its handsets. LG is a dominant brand in South Korea, but generally trails other handset makers outside its home country.
LG's arrival on the mobile payments scene puzzles some analysts, who note the relatively low level of consumer demand for mobile payment options. Apple Pay, the only Near Field Communication-based wallet on iPhones and Apple Watches, is still working to gain broad traction with consumers despite already being a year into its lifecycle. On Android handsets, the options are newer but more diverse, headlined by Google's own Android Pay.
"It's a weird time for mobile payments and the fragmentation we're seeing now from handset makers isn't helping anyone," said Nick Holland, a Boston-based independent payments consultant and longtime analyst of payments trends. LG may be the most unlikely entrant yet, Holland said. "LG Pay's brand has all the glamour of a refrigerator or a deep fat fryer, and it just further muddies the waters."
But Samsung, itself a major household appliances brand, is putting some aggressive marketing support behind Samsung Pay in the U.S. and in South Korea. In the U.S., Samsung Pay this month announced a flurry of new bank partnerships, with JPMorgan Chase & Co. joining the list of major banks supporting its contactless payment service that works at any payment terminal, whether or not it's NFC-enabled. Bank of America, Citi, U.S. Bank, SunTrust and Navy Federal Credit Union also are on board with Samsung Pay, along with several more credit unions, the company says.
Samsung Pay's consumer promotions include aggressive offers such as a $50 Best Buy gift certificate for new users, a $100 credit on Samsung products through Nov. 30, and T-Mobile and Sprint are offering customers a $50 credit for activating Samsung Pay on one of its Galaxy smartphones, according to a Samsung representative. LG did not respond to inquiries by deadline.
Samsung Pay works only with newer Samsung handset models, but its proprietary "MST" technology (obtained when it acquired LoopPay) enables near-universal compatibility with all payment terminals. By contrast, Apple Pay and Android Pay require an NFC-enabled terminal to work. Fewer than 10% of U.S. payment terminals support NFC, so Apple Pay's acceptance is limited now to about 700,000 U.S. retail locations, while Samsung Pay theoretically works at millions of checkout locations.
But that advantage could be short-lived, analysts say, as NFC gradually spreads as a consequence of the U.S. EMV migration. Smaller merchants are getting a shot at NFC acceptance now, with Square Inc. this week rolling out its new $49 NFC, EMV-compatible reader to 100 merchants in various U.S. cities. Users hover their phone or dip their card into the EMV slot to pay; swiping a card is not an option with Square's new device.
Apple Pay, meanwhile, continues its push to expand outside the U.S. It launched in the U.K. last summer, and in Canada and Australia this month. MasterCard is promoting Apple Pay with a series of "Fare Free Mondays" for commuters in London through Dec. 14, 2014, the companies said.
Because Apple Pay's model requires participating banks to pay a fee, it has limited support in its newest markets. American Express is the only major financial services partner involved with Apple so far in Canada and Australia.
"In Australia, the central banks' interchange price controls crimp economics for everyone, so the big banks apparently balked at sharing a piece with Apple," said Eric Grover, a principal with the payments consulting firm Intrepid Ventures. That could create a "fascinating" opportunity for American Express to exploit, Grover said.
Apple also plans to launch Apple Pay in China in February, according to a Dow Jones report. Apple has inked partnerships with four of China's state-owned banks, but so far has no deal with China UnionPay, the state's credit and debit processor.
There may now be more competing mobile payment options than the market is ready for, and it all may add up to a meaningless race in the short term, Holland said.
"Lots of research points to the fact that consumers tend to prefer mobile payment services coming from their primary financial institution over the likes of Apple, Google or [the Merchant Customer Exchange]," he said. "Many people still want to have a foot in a brick-and-mortar financial institution, even if it's digitally."