Mobile Payment Services

PDF version of this report
You must have Adobe Acrobat reader to view, save, or print PDF files. The reader
is available for free

Mobile Payment Services

by Michael Gariffo

Docid: 00021393

Publication Date: 2105

Report Type: TUTORIAL


Now that the average person’s smartphone has come to replace
their camera, laptop, calculator, MP3 player, and more, it’s not surprising that
this seemingly universal tool has set its sights on yet another daily carry
item: the wallet. With the introduction of mobile payment services, consumers
can leave their wallets at home and use their smartphone or even their
smartwatch to pay for goods and services. Although not adopted very widely
within the US yet, mobile payment is poised to offer not only the convenience of one less item
to carry but an increased level of security thanks to the
layers of protection offered by most providers. This
report looks at the current state of mobile payment services, how they work,
their benefits and drawbacks, and which services are currently most popular.

Report Contents:

Introduction and Definition

[return to top of this report]

A mobile payment service is any offering that allows consumers to pay for
goods or services via a mobile device, be it a smartwatch, smartphone, or even a
tablet. These solutions have also been referred to as digital wallets, although
that term generally has broader connotations and can also be applied to
that do not make use of mobile devices. For the purposes of this report, we will
examine only those offerings that qualify strictly as mobile payment
services. Although this limits the scope of this examination somewhat,
it still includes all of the variables that can be applied to
the category, including the technology used for processing the payment,
the available funding sources, and the variety of security measures and even
security flaws that can be found within all of the current mobile payment
offerings. While the mobile payment market is starting to mature, it is
not yet at the point where many industry standards have been promoted. Rather, as with most newer technologies, protocols
and practices are still jockeying for position, attempting to outperform each
other to become that industry norm. Below is an examination of some of the
major differentiators currently vying for dominance within the mobile payment
field, as well as observations on which could prove a winner
within a given area of mobile payment processing.

Payment Transmission Technology

The number of technologies that app and device makers,
not to mention banks, have
attempted to use for mobile payments is fairly widespread. However, they have
been mostly whittled down at this point to the three most commonly applied
technologies: QR codes, Magnetic Secure Technology, and NFC (near field communications).

  • QR Codes – QR codes
    have been used for many smartphone applications due to the ease with
    which they can be recognized by either a device’s camera or the fairly
    ubiquitous laser scanner found at most point-of-sale (POS) terminals. This
    makes it easy to accept mobile payments at POS terminals that have not been
    outfitted with newer technologies, and also provides the possibility of
    accepting mobile payments with a second mobile device, filling the same role
    popular mobile credit card scanners from the likes of Square and PayPal. The
    technology has been in use for several years as a payment method among
    specialized platforms such as Starbuck’s giftcards. It has, in many
    cases, also been tightly integrated with loyalty card programs, allowing a
    company and consumer alike to simply log their transactions while a purchase
    is being made rather than having to scan a separate loyalty card. Despite
    these benefits, QR codes do have some drawbacks. First, the
    scanners are often less than reliable and nearly always require the
    consumer to hand their device to a cashier, something many are
    understandably reluctant to do. There is also a certain level of security
    concern since the data needed to process the payment essentially appears
    on screen to be scanned. Although it would still take some level of
    electronic trickery to capture someone else's payment data this way, it is not as invisible
    and hard to steal as the signals provided by NFC-based or magnetic-based payments. These
    reasons, along with a current, general industry preference for NFC, have led
    to QR codes remaining a niche method of mobile payment transmission.
  • Magnetic Secure Technology – Although it has only come
    into use as a mobile payment method in more recent years, this is essentially the
    same technology that has been powering credit card payments for decades.
    This method works similarly to NFC in that the customer’s smartphone
    transmits a wireless pulse of data to a POS terminal when held near it that
    contains all of the necessary payment information for the transaction to be
    processed. However, unlike NFC, this technology can transmit that data
    directly to the magnetic strip reader that nearly all credit card processing
    machines are already equipped with, even if they lack the necessary hardware
    for NFC detection. This means that locations with older hardware, as well as
    those with compact, and even smartphone-based card readers can still accept
    mobile payments with this method, as it is recognized by the POS terminal as
    a credit card being run through its reader. Although this technology shows
    great promise, it is still a somewhat limited solution as, at the time of
    writing, the only smartphone makers offering it were Samsung, with its Samsung Pay mobile payment solution,
    and LG which powers its LG Pay solution with its nearly identical Wireless
    Magnetic Communication technology.
  • NFC – The most common mobile payment technology is currently NFC.
    Like Bluetooth, this technology relies on radio waves to transmit small bursts
    of data, in this case the necessary digits required for processing a mobile
    payment. Unlike most other transmission technologies, the range is purposely limited to a very small distance, usually less
    than six inches. This provides a level of security as well as a clear method
    through which users can cause two NFC-enabled devices to interact: by
    tapping them together. This is the technology that powers the vast majority
    of "contactless" payment systems and has been in use for years via
    card-based payment terminals at public transit locations and on many
    vehicles. Although most older POS terminals need to be upgraded to
    enable the new payment form, the technology is relatively inexpensive and
    is becoming more widely available. This is important as, like the
    POS terminals, the smartphones being used in this scenario must also support
    the technology. Although Android-based devices included NFC support for
    many years, it is only more recently that Apple joined the bandwagon
    by including NFC in its iPhone 6 and 6 Plus as well as
    within its Apple Watch and the more recent iPad updates. As with many other nascent technologies,
    the Apple stamp of approval has done wonders for the technological protocol,
    pushing it to the forefront and persuading many payment platforms and
    retailers that did not previously support it to make the necessary upgrades.
    Barring the introduction of a completely new method of transmitting payment
    info, NFC is likely going to be the standard for at least the next
    several years.

Payment Sources

Of course, when using one of the mobile payment services we will be
discussing, the actual funds behind the payment must come from somewhere. As
with most aspects of this technology, there are several options, all of which
have reached some level of popularity. Unlike the other areas of mobile payment,
the source of funds is not necessarily a facet where a single option will become dominant. Rather, it is likely that the most popular mobile payment services
will continue to support two or more of the following options, allowing their
users flexibility in how they would like to fund their purchases.

  • Third Party Digital Wallets – This refers to third party payment
    services that can be used as funding
    sources. The most popular of these is PayPal. Although third party digital
    wallets are not particularly popular with the leading mobile
    payment services, several of them do support some level of mobile payment transmission. It’s worth
    noting that PayPal itself is even accepted at some retailers without any
    device or credit card being needed. Users simply sign in with
    their PayPal info and use the service’s standard payment methods to
    complete the purchase. This form of "deviceless" payment has, so far, not
    caught on in more than a few retail chains.
  • Carrier Billing – This method of payment charges the
    transaction to the user’s monthly wireless carrier phone bill. At this
    point, this option is only typically available for digital purchases such
    as from the Apple App Store or Google Play. However, given the fact
    that the payment infrastructure is in place for processing these types of
    transactions, it could conceivably be applied to physical purchases as well.
  • Bank Account – This is the second most commonly used
    payment source and simply refers to drawing funds from a user’s own
    bank account. This can be handled in one of two ways: Via an electronic
    check, which is withdrawn directly from the user’s account, or via a debit
    card issued by the user’s bank and supported by one of the major credit
    providers such as Visa or MasterCard. Although the former option is not
    supported everywhere, the latter is processed in a nearly
    identical fashion to a standard credit card payment, making it as universal
    an option as is currently available to fund mobile payments.
  • Credit Card – The final and most common option is
    using a credit card as a funding source. This has become the go-to payment
    method for most mobile payment services thanks to its ability to leverage
    the strong digital transaction infrastructure most credit providers already
    have in place. It should be noted, however, that not all credit providers
    are supported by all mobile payment service providers. Although this is
    changing as providers adopt new technologies, users may find that a
    particular credit card they would like to use as a mobile payment
    source is not yet supported by their provider of choice, particularly in the
    case of credit cards issued by retail stores or smaller banks.

At this point, many readers may be thinking that this whole concept seems a
bit complex and potentially problematic. Although this can be the case,
particularly given that it is still early days for the payment technology, there
are some real-world benefits to using a mobile payment service versus simply
whipping out cash or a credit card when it comes time to check out.


  • No Physical Wallet – This is the primary benefit most people
    immediately realize when told of the existence of mobile payment services.
    Not only does it mean that the consumer can potentially have one less thing
    to carry with them on a daily basis, it also means they have one less
    thing to lose or have stolen. In fact, this is a large part of the security
    provided by mobile payment services as a whole. Unlike losing cash, the loss
    or theft of a smartphone can be countered by any of the built-in anti-theft
    measures included in both iOS and Android, where most mobile payment
    services reside. The ability to lock the lost or stolen device in question
    means that thieves cannot use it to make purchases, even before they get to
    the several layers of security they would have to circumvent in order to use
    the device for a purchase. In the same vein, the built-in device tracking included
    in all major smartphone platforms provides the user with a much better chance of
    recovering their smartphone than they would a lost or stolen wallet. Aside
    from the security, there is also the simple fact that a mobile payment
    service can store a nearly limitless number of credit cards and, in most
    cases, loyalty cards, making it possible to carry a number of payment
    methods on a daily basis that would be impractical with physical cards.
  • Increased Transaction Security – This varies from service to
    service, but all of the offerings covered later in this report offer at
    least one extra layer of protection when compared to using a physical
    credit card. The simplest and most ubiquitous of these is that the
    cashier is never able to see the user’s credit card info. While this may be
    the case with many PIN pad type purchase interactions, it is often
    counteracted by the cashier needing to see the card in question for
    verification purposes. This provides ample opportunity to copy down the
    necessary info from the card to make an unauthorized online
    transaction. Since the user’s card number is typically never displayed on
    screen, mobile payments remove that possibility entirely. On a more complex level,
    several modern payment services even hide the user’s information from the
    payment processing hardware itself by using a combination of encryption and
    individualized credit codes. These codes are used in place of the
    consumer’s actual credit card info, ensuring that their personal information
    is never transmitted at all during the payment process. Finally, most
    payment platform also require the user to verify their identity via at least
    one biometric technique prior to authorizing the payment. This typically
    relies on fingerprint recognition, but has more recently also included iris
    scanning or face scanning technology.
  • Loyalty Cards and Connected Services – While many
    businesses offer some form of loyalty program to drive sales and provide
    them with customer usage metrics, consumers often find the hassle of
    remembering their loyalty cards and providing them at check out to be too
    much of a burden to go through with at every transaction. The possibility
    exists within several mobile payment services to expedite the entire process
    by having a user’s loyalty info transmitted along with the necessary payment data.
    This means that a single tap can serve the same purpose as scanning a
    loyalty card in addition to scanning the buyer’s credit card. Similarly, businesses can
    offer coupon codes that can be pre-loaded onto a user’s account. This allows
    them to easily and conveniently apply them during checkout, thus streamlining the
    process of providing discounts while also offering an instant method of
    tracking how those discounts were used.

As with nearly any major change to "the way things have always been done,"
swapping a traditional wallet for a mobile payment service does come with some
drawbacks as well.


  • Acceptance – This is an issue that is waning but is
    still very much a problem for all mobile payment services. Where everyone
    accepts cash and nearly everyone accepts credit cards, the number of
    businesses accepting mobile payments is smaller. This saw its
    greatest change with the launch of Apple Pay, which is causing a growing
    number or retailers to install the necessary NFC-based equipment required to
    process mobile payments.1
    Although this is a move in
    the right direction for the mobile payment industry as a whole, it does not
    necessarily mean that all of these retailers are now supporting all mobile
    payment providers. Yes, the installation of the NFC-enabled hardware that is
    required to accept Apple Pay can generally be leveraged to accept other
    mobile payment services. However, an agreement must still be in place, in
    most cases, between the retailer and the service provider in order for the
    payment to be processed. This significantly limits the range of retailers
    accepting mobile payments services as a whole when compared to more
    traditional payment methods. That said, this factor is changing every day,
    and should become a non-issue within a few years, particularly given growing
    pressure from the US government to introduced NFC technologies to payment
    processing for security purposes, and the presence of Magnetic Secure
    Technology as a potential alternative which could eventually grow beyond
    Samsung-branded devices and services. 
  • No Physical Wallet – As
    odd as it may seem, what was a
    benefit above can also prove to be a major drawback if the smartphone, smartwatch, or tablet on which the user is depending for their mobile
    payment service is lost or stolen. Even if the user’s smartphone is
    simply dead, it could mean that the unlucky device
    owner is not only without a means of communication but
    also without a means of payment. This could lead to unfortunate situations
    where a person becomes stranded or unable to pay for something necessary. Of
    course, it is just as likely that a user will lose his or her wallet, placing
    them in a very similar situation. However, embedding all of the importance
    of a smartphone and a wallet into a single device does give it a very, very
    high level of impact on a person’s day if that unit is no longer available.
  • Security Gaps – All of the major mobile payment service
    providers are working diligently to close any security gaps that might arise
    as their services see wider use. However, as with any industry where money
    changes hands, thieves are working just as hard to find ways to circumvent
    those security measures. Early on, this was as simple as stealing a
    smartphone and using its mobile payment app as quickly as possible,
    potentially before the rightful owner even knew it was gone and before the
    device could be locked. Thankfully, this particular issue has largely
    been prevented by the inclusion of biometric scanners on most high-end
    smartphones, a feature that quickly became a required component of most
    major mobile payment services. However, even these scanners can be
    circumvented, often with relatively easy-to-acquire tools.2
    It is for this reason, among others, that mobile payment providers are also
    exploring additional technologies for those wishing to employ the highest
    levels of security.

Mobile Payment Service Leaders

[return to top of this report]

Having covered the basics of mobile payment services, as well as their
potential and risks, the next logical step is examining the actual services that are available to consumers today. Although there remain a
bevy of services jockeying for position and trying to grow their user base,
recent acquisitions, mergers, and closures have resulted in the industry being
dominated, by far, by a trio of service providers. They are Google Pay, Apple Pay, and Samsung Pay.

Figure 1. Google Pay

Google Pay

Google Pay, originally called Google Wallet and then Android Pay, is by far the oldest of the services
that will be covered
here as well as one of the first payment service launched, period. It debuted
on May 26, 2011, and subsequently released to the public on September 20, 2011.
3, 4 This gave the service a significant head start over the other duo covered here, but that time did not benefit in the way
one might expect. Due to the relatively small Android user base (at least
compared to today’s figures) and the severely limited number of supporting
banks, Google Wallet did not show much in the way of early success. Despite
this, Google soldiered on with the service, sticking with it through the years
and continually adding new banks, merchants, and retailers as its partners. Despite Google’s best efforts,
they did not grow its
collection of partners to the point where Google Wallet could match what Apple Pay launched
with, let alone the number of merchants and retailers who directly support Apple supports today.

Knowing this, and being well aware of the impending launch of Apple Pay,
Google made a move to correct much of its weakness and to disrupt the mobile
payment industry as a whole: it acquired Softcard. Although it was hardly a
household name, Softcard began life as a joint venture between three of the
largest wireless carriers in the US: AT&T, T-Mobile, and Verizon Wireless. Then
known as Isis (later changed to avoid the negative connotations now
associated with the terrorist organizations going by the same name), the company was created as a unified platform
available across devices on all three carriers to serve as the premiere
mobile payment provider. Early partnerships flourished and included Discover
Financial, Barclaycard, Visa, Mastercard, and American Express. Despite a
promising start, a lack of cohesive branding, zero advertising, and a
questionable bloatware-esque app interface led to the service being largely
ignored. The borderline disastrous outcome made all three carriers more than
happy to court potential buyers, with several companies allegedly
bidding for the remainder of the business. Although the involved parties were
never fully disclosed, Google eventually walked away with all Softcard assets
in February 2015. This not only provided Google with in-place agreements with a
whole selection of new banks and retailers, but also the full backing of the
three involved carriers.5 Now that
there was no in-house service to compete with Google Wallet, the trio
whole-heartedly threw their lot in with Google, promising to fully support its
mobile payment platform and to pre-install the necessary app on a selection of
smartphones across all three networks. As a result of this major change in
the technology and supporters behind Google Wallet, the company saw fit to
change the name to match the naming convention that others in the industry
seemed to favor, redubbing its offering Android Pay. The service offered
essentially all of the same features as its predecessor, with wider support from
banks, credit cards, and retailers.

Following this era of growth, Google faced something of a conundrum in its
ongoing efforts to add a stronger
online payment component to its mobile payment services. Originally, the company
did this by separating its online payment aspects into its legacy Google Wallet
app. However, as time wore on and competing services expanded to include their
own online payment aspects, Google chose to once again unify its branding,
creating a single "Google Pay" platform which incorporated all aspects of
Android Pay and Google Wallet into a single app and interface.

This is where Google currently finds itself now: In
direct competition with Apple Pay and Samsung pay for industry dominance. Despite
its years of experience, it is impossible to deny that Google Pay is still the
underdog in this race. Its lack of the "cool factor" that Apple Pay launched
with, as well as its much more fragmented and less widely supported payment
platform, have resulted in its being generally thought of as a very niche
product. Similarly, it cannot offer the nearly ubiquitous level of acceptance
that Samsung can due to its magnetic secure technology. That said, it is hardly the first time Google found itself as a
underdog in a race against Apple or Samsung. Once upon a time, critics all over the world
predicted that iOS’s lead in the mobile smartphone operating system market was
unassailable. Yet, it now finds itself in second place behind Google’s own
Android in most developed smartphone markets.


Google Pay operates via a combination of NFC technology and a required
mobile app. The required technology is present on most Android
handsets being released today, which are the only units on which an Android Pay
user can enjoy its full level of functionality. Although a Google Wallet app was
available for iOS, it did not make the transition to Google Pay as it could not
support the tap-to-pay functionality that the service now exclusively relies on.

  • Supported Banks – Google Pay currently supports
    "thousands" of banks and all major credit cards, with more of both being added on
    a regular basis.
  • Supported Merchants – Google Pay is accepted at all
    physical locations equipped with NFC technology at their POS terminals.

Security Features

Since Google Pay only passes the information about its own virtual card to the merchant, the customer’s actual credit card info is
never revealed. Although it would technically still be possible
to steal the buyer’s card info, it would be essentially useless
without the associated device. This security measure is further bolstered by the
option to require the entry of a PIN or fingerprint when opening the app. As with any modern
debit card, if the correct PIN is not entered when the buyer is prompted, no
charge can be put through as the actual payment functionality of the app will
remain inaccessible.

If a device with the Google Pay app is lost or stolen, the associated
payment account can be locked or cancelled via the Web.

Finally, if all of these security measures fail and a criminal manages to make
unauthorized charges to an Google Pay account, the company offers 100 percent fraud
protection against any "verified unauthorized" transaction within the US. Users
will also be alerted if Google believes any suspicious activity has occurred on
their account, similar to the services offered by most modern credit and debit


  • Accepted in Apps – Google has integrated Google Pay
    into its Google Play storefront by allowing it to serve as a payment method
    for apps, media, and in-app purchases. This means that any of the multitude
    of payment methods supported by the service can subsequently be used by
    customers within any of Google’s digital storefronts.
  • Accepted on Web sites – G Pay is also accepted on some Web sites,
    particularly those that use one of Google’s checkout services.
  • Variety of Supported Devices – Unlike Apple Pay, which only works
    on iPhones and Apple Watches, or Samsung Pay, which only works on Samsung
    devices, Google Pay is available on devices from numerous manufacturers
    spread across numerous carriers. The only requirement for its operation is
    the presence of NFC support, which nearly all Android devices, now ship
    with, even some budget handsets.
  • Longevity – Given the hard times through which Google
    has stuck with Google Pay, it seems likely that the company has no plans
    to fold up the service and call it quits any time soon, particularly with
    the money it invested in the purchase of Softcard. This should
    give consumers the confidence needed to trust the service with their
    personal information, as well as making it worth their time to set up the
    service, without fear that it will have been a waste of effort if it is
    shuttered somewhere down the line. Unfortunately, the average life span of
    many mobile payment services over the years have made this a worthwhile
    concern for shellshocked consumers.


  • No Support for iOS – As stated above, Google Pay no
    longer support iOS in any way, shape, or form. This is due to Google’s shift
    in focus to a completely tap-to-pay platform, a method of payment which it
    cannot support on iOS due to Apple’s locked-down hardware.
  • No Ability to Send Money to Others – Google originally
    allowed users to transfer money directly to other users via Google Pay.
    However, the company has since terminated this feature, leaving such
    transactions to the likes of PayPal, Venmo, and other money transfers and
    payment services.
  • Lack of Specific Support – Since Google Pay functions like any other contactless payment credit card, it is processed
    literally as if it were a card. This gives it the flexibility to be used at
    merchants that do not have a specific agreement in place with Google, but it
    also means that that merchant’s staff will have little or no knowledge in
    processing Google Pay payments. While Apple Pay requires a certain level
    of interaction between Apple and the retailer in question to be supported,
    that agreement being in place also assures that the company’s cashiers will
    very likely have been prompted on the acceptance of Apple Pay. The same
    cannot be said for Google Pay.

Figure 2. Apple Pay

Apple Pay

Apple Pay debuted at the iPhone 6 event held by Apple on September 9, 2014,
and was introduced as part of the iOS 8.1 update on October 20, 2014. The
service was portrayed as a way to revolutionize making non-cash payments at
points of sale and for certain services, particularly public transit and at entry
points for public attractions. Due to Apple’s decision to ignore NFC technology
until the introduction of the iPhone 6 and 6 Plus, previous iPhone owners were
out of luck if they wanted to use Apple Pay. However, owners of the iPhone 5,
5S, or 5S could access the service by using a paired Apple Watch, which didn't
launch until April 24, 2015. Although the smartwatch would allow essentially the
same level of functionality as its iPhone counterpart, it was not
compatible with a fingerprint sensor. This lack of security was circumvented
by Apple through the use of a one-time PIN that must be entered each time the
watch is strapped on in order to use Apple Pay. This guarantees that, if the
watch is lost or taken from the wrist of its owner, it will be useless as a
payment method to the thief.

Apple itself acknowledged that it was not the first company to try a mobile
payment platform. However, it believed that it was launching a service that
finally did away with the lack of convenience found in many prior offerings,
a flaw that, Apple believed, had caused these services to fail. In that vein, the
payment process was designed to be as simple as possible and was integrated
with Apple’s TouchID sensor (which will be covered in more depth below). Even
those dubious of Apple’s chances of proving successful admitted that the new offering was the easiest-to-use mobile
payment platform yet released and that few, if any,
services launched with as much industry clout behind them as Apple Pay.

The question of whether or not Apple Pay would prove successful,
especially in comparison to existing offerings, was answered almost immediately
as company CEO Tim Cook announced that more than one million credit cards had been
registered with the service just three days after it was made available. This
may be unsurprising when taking the above facts into account and adding the
realization that more than 200,000 physical stores were accepting the mobile
payment platform at launch.6
This number has since continued to grow, with new retailers and new
locations being added to the list of supporters on an almost daily basis. That
said, the service still represents only a miniscule fraction of the total retail
payment transactions being made in a given day. While Apple Pay may have proven
itself as a success among the currently available mobile payment services, it
has not made mobile payments as a whole anything like a ubiquitous part of most
customers’ daily lives.

Apple’s lack of ability to completely replace traditional credit cards has
even led the company to launch its own branded credit card in collaboration with
Mastercard. The Apple Card, which launched in the summer of 2019, was designed to be
tightly integrated into the Apple Pay platform, while also providing a physical
card that can be used by cardholders at locations that do not accept Apple pay.
While some saw this as an expansion of the Apple Pay platform, it could also
be construed as an admission by the company that physical credit cards are not
entirely replaceable just yet. The card itself has also had a somewhat rocky
history, coming under fire for being easily stained or damaged. Since its
launch, Apple has continued to expand the capabilities of the Apple card, most
recently having launched a family access option that makes it possible for the
user's children or spouses to be given limited access to their account.


Apple Pay operates via NFC and a companion app found on Apple iPhones, newer iPad and iPad Mini
models, and on all models of the Apple Watch. The system uses
either a PIN (in the case of the Apple Watch) the user’s fingerprint for devices
with TouchID, or a
facial recognition scan (in the case of the iPhone X and newer models) to
verify their identity. The fingerprint method of verification is handled by
Apple’s TouchID sensor and is nearly instantaneous if the user places their
designated finger on the sensor while tapping the device to the POS terminal’s
NFC pad. The FaceID scan works similarly, although it may be a few fractions of
a second slower. When making a purchase, users can choose between visual representations
of each credit card they have registered with Apple Pay. In addition to physical stores, Apple
Pay can also be used with certain apps downloaded from the Apple App Store,
allowing users to make purchases or send payments via the same credit cards
registered for in-store use.

  • Supported Banks – Apple Pay
    requires the credit card provider and the participating bank to both
    specifically support Apple Pay. Supported credit providers in the US include
    Visa, Mastercard, and American Express, and Discover. As for particular banks, Apple claims to
    support "the top U.S. banks" as well as "financial institutions all over
    the country." Given the fact that most major credit cards are distributed by
    only a handful of banks, this will mostly prove an obstacle to those wishing
    to use Apple Pay with debit cards issued by a lesser-known
    bank. For these individuals, Apple has provided a full list
    of supported banks, which numbered in the hundreds at the time of writing.
    Apple is also somewhat unique in that it supports specific retailers’ store
    cards, although this list is currently limited to just a few stores.
  • Supported Merchants – As with banks, merchants must
    specifically support Apple Pay in order for it to be accepted at any of
    their retail locations. Thankfully for iOS device owners, the service is
    accepted at more than 100 of the most well-known retailers at the time of writing,
    with new additions being brought the list all the time. As the service continues to
    grow, it is likely that the
    list of
    supported merchants
    will continue to grow as well.

Security Features

As stated above, users are required to either enter a PIN, use the TouchID
fingerprint scanner, or the FaceID facial recognition scanner on their device in order to verify their identity when
making a purchase. This should, theoretically, prevent the possibility of a
thief with a stolen device using it as a method of payment. However, the
adequately motivated could, also theoretically, use a proven hacking
methods to circumvent the fingerprint/facial recognition scanner or illegally obtain the
user’s PIN in the case of the Apple Watch.

The showpiece of Apple Pay’s security, aside from its biometrics tech, is its
use of unique "Device Account Numbers" in place of the user’s actual credit
card info. These individually assigned digits are transmitted in an encrypted form from the users iOS device to the POS terminal. This
information is then used on the back-end of the payment processing operation to
connect to the actual credit card account in order for the necessary funds to be
drawn. The result is a payment process during which the merchant –
including all involved cashiers and employees – remain completely unaware of the
user’s personal or credit card info. Apple even claims that it has no record of these
Device Account Numbers itself, aside from the version stored individually on
each Apple Pay-enabled device.

Apple’s Find my iPhone and Find my iPad Web apps have also been updated to
immediately terminate any usage of Apple Pay on a lost or stolen device. This is
handled through the same interface as is used to find or lock a lost or stolen
device and can be reversed if the device is found or recovered.


  • The Incumbent – Despite launching
    nearly half a decade later than Google Wallet (now Google Pay), Apple Pay is almost
    undeniably the reigning leader of the mobile payment market. This does not
    necessarily mean it is accepted at the most places. Just the opposite, it’s
    decision to use a closed platform means that it will need to individually attract
    every new merchant and bank it supports. However, the user base currently
    supported by Apple Pay is, by far, the largest of any mobile payment
    platform. This guarantees that banks, stores, and other financial
    institutions will continue to work with Apple and its users to support and
    expand the places where it is accepted as well as its capabilities.

  • Built-In Loyalty – When Apple Pay
    launched, its app essentially replaced Apple’s previously available Passbook
    app. This application collects and tracks loyalty cards, transit tickets,
    and various other digitally available purchasing data and vouchers. These
    features have all been integrated into Apple Pay via the "Wallet"
    function, making the aforementioned
    inclusion of automatic loyalty redemption and quick-access coupons a
    reality, as long as retailers support it.

  • Quick Payment – Apple Pay’s payment process is among the
    simplest and fastest. While the other options require some combination of
    unlocking the device, entering a PIN, launching an app, and signing in,
    Apple Pay only requires the user to tap the device on an NFC-enabled payment pad
    while holding their finger on the TouchID sensor, or simply looking at the
    device, in the case of the iPhone X and newer models.

  • Companion Card – Minor gripes about the Apple Pay Card aside, its
    availability as an option to make purchases with when more advanced mobile
    payment methods are unavailable remains a valuable bit of flexibility for
    Apple Pay users.


  • Locked Down Ecosystem – As stated above, Apple Pay requires a
    contract with the retailer so the service may not be available everywhere the user wishes.
    Although nearly all retailers would be at least willing to accept
    Apple's terms, not
    all may be offered the opportunity. This means that smaller retailers who could potentially
    accept the card-based payments of Google Wallet, cannot accept Apple Pay
    since they have little or no chance of ever signing a contract with Apple.
  • High Price of Entry – Apple Pay is wonderfully easy to
    set up for users that already have an iPhone 6 or 6 Plus or later, as well as those
    with an Apple Watch or one of the supported iPad models. However, for those
    without any of these devices already in hand, the price of entry is steep
    indeed. Switching from an Android unit to an iPhone will cost users at the
    very least several hundred dollars for a used iPhone and potentially much
    more for a newer iPhone. Similarly, the entry
    point for owning at Apple Watch is $200 and going on up to over $1000 for the
    priciest "standard" models. Users wishing to join Apple Pay
    without one of the latest devices in the Apple ecosystem will
    likely be deterred by the initial cost outlay it would require.

Figure 3. Samsung Pay

Samsung Pay

Unveiled at the 2015 Mobile World Congress, Samsung Pay was
immediately positioned as a replacement for an earlier offering from the company
dubbed Samsung Wallet. While the product it was replacing gained little traction
among consumers, Samsung fully intended Samsung Pay to be a direct competitor to
Google Pay (then named Android Pay) and Apple Pay. This may have seemed like a lofty goal but it was not
entirely out of the realm of possibility given Samsung’s massive installed user
base. The company’s Galaxy S and Galaxy Note smartphone lines had become the de
facto flagships of the Android operating system and are some of the
best-selling handsets on the market, period.

If the above info is not enough to prove that Samsung was serious about its
mobile payment solution, then the company’s mirroring of Google’s decision to
buy an established mobile payment provider should confirm the idea. In Samsung’s
case, it acquired LoopPay, a company that, while not as large as Softcard,
offered Samsung access to a selection of already-established contactless payment
technologies as well as the then-exclusive ability to communicate wirelessly with
legacy magnetic stripe readers. Where Google was focusing on partnerships and service agreements,
Samsung was focusing first on its hardware. This acquisition, which was
announced on February 18, 2015,

shortly before the unveiling of Samsung Pay, was completed in time for the
newly acquired tech to be incorporated into Samsung’s Galaxy S6

The most important aspect of this acquisition is the fact that, in addition
to NFC-based technology, LoopPay also supports a method of allowing the
smartphone to communicate with existing magnetic stripe card
readers, dubbed Magnetic Secure Technology. The inclusion of this capability meant
that, from when the service first launched on June 30, 2015, it could already boast
being accepted at the widest range of locations and retailers of any of the
mobile payment service then available. This is due to the fact that, when
Magnetic Secure Technology is used to transmit the user’s payment info, the POS
terminal accepts it as if a completely standard credit card had just been run
through its magnetic stripe reader. This obviates the need for any bank or
retailer partnerships, and makes it possible for even the oldest usable POS
terminals to accept Samsung Pay, even if NFC technology is not supported.
Although LG later launched a competing technology in Wireless Magnetic
Communication-based payments on its LG Pay service, Samsung is still, by far,
the most dominant provider of this technology in the western world.


Like both aforementioned solutions, Samsung Pay can use NFC technology to
transmit a payment to a compatible POS terminal. The actual process closely
mirrors Apple Pay in first allowing the user to select a given credit card and
then prompting them for a fingerprint scan while tapping the device on an NFC-enabled
pad or near the POS terminals magnetic stripe reader. Samsung remains
understandably tight-lipped about how the technology acquired from LoopPay
works. However, it has generally proven itself to be as reliable as NFC
communication, with a much, much wider range of compatible hardware with which
it can communicate.

  • Supported Banks – Samsung cannot match Apple Pay’s massive list
    of smaller banks. However, the service is still compatible with most of
    the major card issuers and banks in the US, including Bank of America,
    Citi, Chase, US Bank, American Express, and Wells Fargo. It can also be
    used in conjunction with a Visa, Mastercard, or American Express, or
    Discover card.
  • Supported Merchants – This is the area where Samsung
    Pay shines its brightest. Where Google Pay and Apple Pay require NFC and an
    active contract with the retailer in question, Samsung Pay able to be accepted at nearly any retailer in the world that has a
    traditional magnetic stripe card reader. Although currently the US
    government is moving towards requiring NFC-enabled pads at all retailers for
    security reasons, that transition is expected to take years and be
    reluctantly by store owners who will have to lay out the funds to
    upgrade their point of sale terminals. In the meantime, Samsung has the
    opportunity to capture a huge section of the customer base simply by being
    able to provide contactless payments just about anywhere.

Security Features

Security is another area where Samsung Pay very closely mirrors Apple Pay.
Like its competitor, Samsung Pay requires a fingerprint scan to function. However, Samsung Pay now also supports iris scanning technology as a
method of verification on Samsung’ Galaxy S8 and S8+ and all newer flagship
smartphones. The technology was also originally included in the
cancelled Note 7.

This is joined by a very similar "tokenization" system, which, like Apple
Pay, shields the user’s info from direct contact with the merchant by replacing
it with an individually assigned number.

Finally, as with all modern Android phones, the devices being supported by
Samsung Pay include several security options for locking and wiping a lost or
stolen device. This, combined with the aforementioned need for a fingerprint
or iris scan, should, in theory, prevent any thief from utilizing a stolen smartphone as
a payment method.


  • Usable Anywhere – Samsung Pay uses the technology
    acquired from LoopPay to enable users to have their smartphones interact
    with traditional magnetic stripe readers. This is done in much the same
    contactless way as NFC payments and appears to be possible with nearly all
    existing models of credit card reader.

  • Apple’s Counterpart – If any company
    running the Android platform could be said to be able to compete with Apple,
    it would not be Google, it would be Samsung. Despite not having designed or
    created Android, Samsung has had the greatest success with the operating
    system of any of its adopters. The company’s entire line of smartphones rely
    on the OS, and are among the best-selling units in the US and around the
    world. It has become the unofficial face of Android, with many often
    mistakenly referring to Android devices in general as "a galaxy." This
    level of clout gives Samsung a better chance to directly
    compete with Apple than nearly any other company, possibly even Google.

  • South Korean Market – Samsung is the only company
    listed here with a significant and local presence in the mobile payment
    market outside of the US. Although Apple has expanded its reach to more of
    North America and Western Europe, the company has yet to broach this
    particular nation of typically tech savvy consumers. Due to Samsung’s position as a highly-respected South Korean
    company, the electronics maker not only has a strong user base in its home
    nation, but also the kind of existing relationship that just about guarantees
    a selection of willing partners for Samsung Pay in its native land. The global adoption of
    this service could also have a trickle-down effect, attracting partners to
    Samsung that have major interests outside the US that Apple Pay may not be
    able to service. That said, Samsung is now competing with the aforementioned LG Pay in its home market as well.


  • Small Selection of Devices – Samsung Pay is currently limited in
    support to the company’s Galaxy smartphone lines, as well
    as some of its Gear-branded smartwatches. Although nearly all of these devices have
    supported the service since its launch, this leaves out many of the less
    popular Samsung smartphone lines, as well as all other brands of Android
  • The Threat of Litigation – Apple and Samsung have been
    locked in a nearly endless series of court battles for the better part of a
    decade. These have revolved around everything from the design of Android
    skins to the usage of on-screen icons to the physical design of
    smartphones and tablets. Knowing this, it is hard to imagine a scenario
    where Apple doesn’t eventually sue Samsung over Samsung Pay. Not only is it named very similarly but
    the interface is
    nearly identical to the one used by Apple. Samsung has, on occasion, managed
    to fend Apple off in the past. However, users may not wish to get involved
    in a financial service that is under a very real threat of cease and desist
    orders, embargoes, or other legal injunctions.


[return to top of this report]

Bringing this report full circle, it is once again time to think
of smartphones as a universal tool. Although device makers have seen fit to include their
particular mobile payment services in a smartwatch and within several tablets, it
is the smartphone that, as a platform, will allow mobile payments to
sink or swim. The early going was pretty rough for mobile payment services, often
finding them hindered by a lack of acceptance, complex payment processes, and confusing
interfaces. That is beginning to change. The promise of expanded NFC
availability, and even the option to use magnetic strip readers in Samsung’s
case, is making it easier than ever to find a merchant willing to accept mobile
payments. Likewise, interfaces have improved and transaction processes have been
streamlined. It seems the industry is finally ready to accept mobile payments as
a viable and widespread method of paying for goods and services.

Are consumers similarly inclined? The logical place to find
an answer would seem to be the original launch of credit cards as a concept.
Just as credit cards were a quicker, more efficient method of making a payment
than using a check, mobile payments are, at least in theory, a quicker, more
convenient way of using a credit card. The mobile payment industry, as a whole,
is something of the next logical evolution in the payment card field.

Yes, there will be some naysayers and some will complain at the
incessant need to have a powered phone with them in order to make a payment.
However, as humans always do when offered a new convenience, people will adapt.
It will eventually become second nature to make sure one’s phone is charged
before going out to make a purchase, the same way it is currently instinctual to
check your wallet to make sure the credit card or cash you intend to use is there.
Mobile Payment services have been a very long time in coming, but the industry
and consumers alike both seem to have reached a tipping point where the level of
work needed to use the technology has become so little and the convenience of
using it so great that everyone involved is more than willing to
look to the future for their payment needs.

[return to top of this report]


[return to top of this report]

About the Author

[return to top of this report]

Michael Gariffo is an editor for Faulkner Information Services. He
tracks and writes about enterprise software and the IT services sector, as well
as telecommunications and data networking.

[return to top of this report]