Samsung Set To Launch Samsung Pay Amid Intense Competition

  • Samsung is expected to release Samsung Pay next week.
  • The new service will try to gain market share from Android Pay and other independent services.
  • There is no distinct added value in Samsung Pay over Android Pay, and its chances to succeed are not high.

Tech giant, Samsung is expected to officially launch its e-payment service next week, two weeks after Google (NASDAQ:GOOG) released its Android Pay and almost one year after Apple (NASDAQ:AAPL) launched its Apple Pay. The current e-payments market is very crowded, with dozens of companies in different sizes competing over fractions of market share. The e-payments market, or mobile payments market as it sometimes called, includes a number of strong players with vast experience that varies from small pure-play companies to large tech companies that use e-payment as a complimentary service.

The group of pure-play e-payments companies include PayPal (NASDAQ:PYPL), Square, Stripe, Dwolla, and many other small players. The group of tech giants that use e-payments as a value-added service includes Apple, Google, Alibaba (NYSE:BABA), Amazon (NASDAQ:AMZN), Etsy (NASDAQ:ETSY), and more. Samsung joins this already crowded market with a service that might face serious difficulties ramping up.

The tech giants group offers consumers a value-added service that enables customers of these companies to extend their relationship with the tech giant and use it to pay for goods and services purchased online or in stores. Until the split from eBay (NASDAQ:EBAY), PayPal dominated this group easily. However, after PayPal returned to operate independently, it has acted as a pure play competitor and leads the pure e-payments players group. In the tech giants group, there is no distinct leader for now, and there is an evolving sub-group of companies focused on mobile devices, trying to use e-payments as a tool to expand their eco-system. Apple does it with its Apple Pay service that allows iPhone users to pay easily across the U.S. (for now), and Google does it with Android Pay (previously Google Wallet) that allows Android users to pay electronically using their mobile device. Samsung is trying to do the same with its service.

According to a report by technology research firm IDC, Android OS controls 83% of the global smartphone market, which highlights the incredible potential of the Android Pay (iOS has only 14%). Samsung accounts for almost a third of Android’s share as the North Korean giant shipped the largest number of devices in Q2’15 and consistently leads the worldwide smartphone sales by vendor. Samsung tries to mimic Apple’s move and offer Samsung Galaxy owners a unique payment service that is available exclusively to them. However, Galaxy devices run Android, and Galaxy users can use Android Pay instead of Samsung Pay, creating an embedded difficulty for Samsung when trying to penetrate the market. In fact, Samsung users have more options to choose from as they can also use Square, PayPal, AliPay, Dwolla, etc., so the actual hurdle to jump over is higher than expected.

In Apple’s case, iPhone users have fewer choices; they can either use Apple Pay or an independent service but not Android Pay or Samsung Pay. An additional hurdle for Samsung Pay is the fact that Google already had an e-payment service (Google Wallet) that is now transformed into Android Pay. So Google did not actually start from scratch; it already has some share of the market. So why would Android Pay/Google Wallet users shift to Samsung Pay? What is the added value of Samsung Pay over Android Pay? For now, it is not clear.

Launching a Samsung Pay service might be nice to chase Apple and Google and prove that Samsung has a comprehensive eco-system at the level and quality of Apple and Android, but, in reality, it doesn’t. Android users could continue to use Google Wallet, Android Pay or a dozen of other apps while Samsung will have to settle for small share left after Apple Pay and Android Pay. The expected failure of Samsung Pay will not help the declining stock price of the company that is already down 15% year-to-date.
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Samsung stock price vs S&P 500 by

Launching Samsung Pay is not a move that a company that wants to become a leader does but a move of a follower and that, in my opinion, highlights Samsung inferior status compared to Google and Apple.

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