It's almost like they didn't see this coming.
Way back in 2012 when Apple (NASDAQ:AAPL) acquired fingerprint sensor specialist, AuthenTec, for $356 million, it was painfully obvious that the technology could and would likely be applied to some type of mobile payments service. That was almost three years ago.
Tim Cook added on the January 2014 conference call that mobile payments was on his mind, which was about as close to an official confirmation that investors can expect that Apple was indeed building a mobile payments service:
The mobile payments area in general is one that we've been intrigued with and that was one of the thoughts behind Touch ID. But we're not limiting ourselves just to that. So I don't have anything specific to announce today. But you can tell by looking at the demographics of our customers and the amount of commerce that goes through iOS devices versus the competition that it's a big opportunity on the platform. [Emphasis added.]
Google and Softcard
Google Wallet had a three-year headstart over Apple, yet the service is widely considered a failure, both in terms of consumer mindshare and financial performance. One of the original engineers even went so far as to call the wireless carriers the "point of failure."
That is why it's so significant that Google just partnered with the carriers and acquired some of the technology and intellectual property related to Softcard. Three of the major carriers (AT&T, T-Mobile, and Verizon) have been building their own payment network for a few years, initially named Isis but rebranded last year to avoid any confusion with the terrorist organization that goes by the same name. Probably a good call.
Google Wallet will soon come pre-installed on Android phones (KitKat or later) sold through these carriers, a notable change from when Verizon infamously blocked Google Wallet many years ago. The current Softcard app will continue working for now, but it will soon be shut down. In a jab at Microsoft, the Windows Phone version will also be shuttered.
Google joining forces with three of the major carriers may pose a significant threat to Apple Pay.
Samsung and LoopPay
Following rumors late last year that Samsung was about to partner with LoopPay, the South Korean conglomerate went ahead and acquired the start-up earlier this month. The technology will presumably be integrated into future devices.
LoopPay's primary differentiator is a patented Magnetic Secure Transmission technology that wirelessly sends the same magnetic data stored in credit cards, which makes it compatible with all existing point-of-sale terminals currently used to process credit card payments.
On the flipside, its biggest weakness is a lack of awareness that the technology actually works. Company execs must assure merchants that it will indeed work, and they are invariably shocked when it does. One of Samsung's top priorities with its new acquisition should be education (both consumer and merchant) and branding.
The company is known for its extravagant spending on marketing, so it might be willing to launch such a campaign. Although, Samsung has been cutting costs recently in the face of shrinking mobile profits. In fact, Samsung just froze wages for the first time in five years, so perhaps the days of spending over $11 billion per year on marketing are in the rear-view mirror.
Samsung has a long list of "S" brands for apps and services, including S Voice (voice-activated virtual assistant), S Health (health data tracking), and S Note (note taking app), among many others, so it is conceivable that the company could rebrand LoopPay as S Pay. That would have the added benefit of strong appeal with animal sterilization enthusiasts, a growing and underserved niche within the broader mobile payments market.
Can they do it?
As Google and Samsung attempt to catch up, the fact that we're talking about two separate rivals actually points to their greatest weakness. Google develops the software platform, while Samsung's biggest strength is hardware. The key to Apple Pay's appeal lies in an integrated approach. Only Apple can provide such a seamless experience.
Google Wallet will work on some Android devices but not others. Any Samsung payment service would inevitably be exclusive to Galaxy devices, and Samsung has a poor track record with software and services. Beyond carriers, can either company construct economically viable partnerships with the major financial instructions like Apple has? Additionally, Google and Samsung will also be competing with each other. All of these factors create confusion at the consumer level.
Google and Samsung may be trying to catch up, but Apple is still quite a bit ahead.