Samsung and PayPal Are About to Show Apple How It's Done

Samsung (NASDAQOTH: SSNLF  ) unveiled its upcoming flagship Google (NASDAQ: GOOGL  ) Android-based smartphone, the Galaxy S5, earlier this week at the Mobile World Congress in Barcelona. The new device has a few small upgrades from its predecessor, most notably a fingerprint scanner supplied by Synaptics.

Despite obviously following Apple's (NASDAQ: AAPL  ) lead, by placing the scanner in the home button like the iPhone 5s, Samsung was able to do something Apple has yet to accomplish. It's partnering with eBay's (NASDAQ: EBAY  ) PayPal to let users pay for items online and in stores password-free.

The FIDO Alliance
The FIDO Alliance, which stands for Fast IDentity Online, is a consortium dedicated to secure authentication for online payments. Synaptics, PayPal, and Google are all members, and have focused on enabling secure mobile payments through unique identifiers. PayPal helped found the organization, and Synaptics joined when it bought Validity Sensors, another founder, last year.

The Synaptics fingerprint scanner on the Galaxy S5 uses the FIDO Alliance authentication standard. Additionally, Samsung will open the fingerprint scanner to developers, so apps like PayPal or Google Wallet can use it for authentication. Apple's TouchID scanner, conversely, is only able to authenticate apps approved by Apple. This is why Synaptics stands to gain, as more phone OEMs adopt fingerprint scanners.

Of course, there's nothing stopping Apple from joining the FIDO Alliance. Its technology could certainly be made to fit the standard quite easily. Such a move, however, might invite competition into a market the company appears very interested in entering.

Apple's m-commerce potential
Apple has more than 575 million iTunes accounts, each with a credit card on file. With hundreds of millions of iPhones in peoples' pockets, and the recent addition of a fingerprint scanner and iBeacon technology in the iPhone 5s, Apple has the groundwork for a payments solution.

PayPal has been very aggressive in this area. It released its own beacon last fall, well ahead of Apple's iBeacon rollout. Additionally, the company has partnered with several brick-and-mortar stores over the last couple years to use PayPal as a payment option. The company's solution has yet to truly catch on, though.

Apple, with its widespread popularity and control of iOS, could ease the friction that currently plagues PayPal mobile payments. But, Samsung is readily working with PayPal to help fix it. This move puts the pressure on Apple to roll out its own solution before PayPal builds a critical mass of users on mobile.

Don't count out Google
Google, too, has had its hand in e-payments for some time with its Google Wallet product. Considering its membership in the FIDO Alliance and its position with Android OS, the company could benefit from fingerprint scanners in more Android smartphones.

The company gained support from Visa and MasterCard last week, when the two credit card giants upgraded their mobile payments platform to take advantage of updates in Android 4.4. The new updates allow Google Wallet to work around carrier-controlled NFC identification.

Google's approach may face more roadblocks than PayPal's direct partnerships with stores, but it has the potential to reach a much broader audience more quickly. The adoption of fingerprint scanners by other Android manufacturers may prove key to further adoption of Google wallet.

It's time for Apple to get in the game
A dominant player has yet to emerge in mobile payments. The release of the S5 may give more credence to PayPal, or even Google, as the go-to mobile payments solution for consumers. The market is expanding rapidly, and Forrester Research expects $90 billion of mobile payments in 2017, a 48% annual growth rate. The market is there. The technology is there. Apple ought to roll out a payments solution soon, before Samsung and PayPal show it how it's done.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 28, 2014, at 2:13 PM, salimyzadeh wrote:
  • Report this Comment On February 28, 2014, at 2:14 PM, GaryDMN wrote:

    More vaporware, no release info or even a tested product to base it on.

  • Report this Comment On February 28, 2014, at 2:35 PM, rigoberto26 wrote:

    For some reason it sounds like a bad idea, no password payments with a system that showed not to work correctly on the samsung finger print scanner. The copycat Korean company is junk making cheap copies of the iphone which do not work good and are buggy. So why would you trust your money with Samsung? Goes beyond me, its a big fail by Samsung junk phones.

  • Report this Comment On February 28, 2014, at 3:40 PM, JarJarThomas wrote:

    Paypal and Samsung are no thread for apple here.

    That is because of the following reasons

    -> clumsy to use fingerprint scanner. It will take more time to use the fingerprint scanner than to pay with credit card

    -> paypal has an awfull bad customer service.

    You use paypal because you have to, not because it is good. As soon as apple will provide an alternative to paypal many will switch (remember frozen accounts, the inability to contact a person if you have problems, stuff like banning several specific vendors ? paypal knows why they fear apple)

    -> security

    samsung stores the fingerprintdata IN THE FILESYSTEM ! WTF really ?? on ANDROID ?

    There it is as easy as 1-2-3 to get that data ?

    They do not even have an encrypted mechanism while obtaining the fingerprint so any hacker can just get the data whenever he wants.

    And that should be secure enough for my money ?

    Neverever.

    -> Users

    Google Wallet did not work, NFC payment did not work, not only because it's clumsy to use but mostly because the users of android don't spend money

    -> anonymity

    No one in europe want's google to give informations about their financial transactions.

    Look at apples payment patents, several have anonymity as a key mechanism.

    With android, paypal and google anonymity is thing of the past. And that's something that people will not endure if it goes about their money.

    So in the end ... paypal/samsung thingi is a gimmick.

    As the special hardware for heart rate measuring (something available since iphone4s with apps on ios)

    So the only thing they do is

    show the world how it is NOT done and fail miserably

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