Samsung and Visa will likely demonstrate the full potential of their contactless mobile payments alliance at this week’s unveiling of the Samsung Galaxy S IV smartphone.
The mobile payments partnership will make Visa’s PayWave mobile app a standard feature on its Near Field Communication-equipped mobile devices and was announced during the Mobile World Congress held in Barcelona in late February. The anticipated unveiling of the next generation of Samsung’s flagship smartphone — colloquially known as the Galaxy S4 — is scheduled for a March 14 event at New York City’s Radio City Music Hall. It marks the first Samsung mobile device release since the partnership was revealed and may shed light on how the new contactless payment method will work.
For the payments industry, one of the most important questions about the PayWave integration with Samsung’s Android-powered mobile devices is how control of the computer chip that houses payments credentials, known as the secure element, will be managed.
Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting, says determining access to secure elements could result in “turf wars” between carriers, handset manufacturers and issuers as mobile commerce continues to develop.
“Carriers want to control secure element access to the consumer and continue to have plans to demand revenue from the secure element,” Crone says.
Through the Visa partnership, banks will be able to load consumer payment account information onto Samsung phones through the Visa Mobile Provisioning Service, linked to the Samsung Key Management Service. The bank customer’s credit card data will go directly to the secure element, not a SIM card, on future NFC Android handsets.
Because it holds the keys to the handset secure element, Samsung will also negotiate the terms for access to that chip with mobile network operators in hopes of avoiding a situation in which carriers would not sell the Samsung phones offering Visa PayWave as an NFC mobile payment technology.
“Think of us as the technology enabler, providing PayWave licensing to Samsung to power mobile payments,” says Bill Gajda, head of global mobile product for Visa.
But much is at stake when South Korea-based Samsung deals with mobile network operators that can wield significant power when it comes to providing subscribers with Samsung phones that allow banks access to the secure element.
Visa and Samsung need to look no further than the problems Google Wallet has encountered with mobile network operators, particularly Verizon Wireless, who control the secure element.
The debate is not solely about the secure element in a handset, Crone adds. When Google switched its payment account data away from the handset and into the cloud, it had more in mind than just making it easier for banks to add payment credentials, he says.
“A company like Google is more interested in ads and offers integrated in payments, because those are more valuable than interchange,” Crone says.
Through a spokesperson, Samsung declined to provide comment for this story.
For its part, Visa doesn’t foresee having an issue with other mobile pay providers, carriers or device manufacturers because of the Samsung deal, Gajda says.
After all, this isn’t the first time Visa and Samsung have been partners. The companies agreed to conduct mobile payment testing during the 2012 London Summer Olympics for athletes and VIPs at the Games.
“Visa has had discussions with Isis, Google Wallet and others, but ultimately consumers will decide which app works best for them,” Gajda says.
The deal with Visa doesn’t prevent Samsung from hosting other technology providers or card brands, nor does it stop Visa from working with other device manufacturers or researching future technologies, Gajda says.
For the time being, Visa looks at the Samsung deal “as an initial alliance to accelerate mobile payment technology,” Gajda says. “We are quite aware and expect consumers will want their physical wallet replicated on a secure element, so Visa is a technology enabler fitting in the middle of this and developing an open approach,” he adds.
Such a viewpoint would leave the door open, from Visa’s perspective, to work with Apple in the future, if Apple were to eventually develop a mobile wallet beyond its current Passbook product.
Being open to a potential deal with Apple would be important for Visa because so much of what will happen next in the world of payments and mobile handsets still rests with Apple, says Brian Riley, senior research director and analyst with Needham, Mass.-based CEB TowerGroup.
“When does Apple flex its muscles on this?” Riley asks. “For example, I don’t see them hooking up with MasterCard as a response to Visa’s move with Samsung.”
However, Apple will eventually need an alignment somewhere in the payments ecosystem, Riley says.
Meanwhile, Samsung appears to be doubling-down on mobile pay. In addition to its contactless payments alliance with Visa, it recently unveiled Samsung Wallet, a bar code-based wallet that, like Apple’s Passbook, stores payment cards and tickets from other mobile apps.