Samsung wants its own mobile wallet. Instead of building it, it's buying one.
On Wednesday, the Korean electronics titan announced plans to acquire LoopPay, a two-year old mobile payments and commerce platform. The startup, based in Woburn, Mass., markets a proprietary technology that wirelessly transmits credit card data without a swipe. Unlike Apple Pay, which relies on NFC-technology, its payment system is compatible with most current sales terminals. Its staff of 64 will join Samsung's mobile division in the U.S.
Samsung declined to comment on the terms of the deal.
"We've been thinking about mobile payments and digital wallets for a while," David Eun, exec VP and head of Samsung Global Innovation Center, told Ad Age. Last summer, Samsung led an investment in LoopPay, along with Visa and Synchrony Financial, a retail finance firm. "As we looked more and more into it," Mr. Eun said, "it became obvious to us that it was a one plus one equals three deal."
For now, the company isn't revealing much about that math. Currently, the LoopPay system works with a piece of hardware, a fob or smartphone case, to initiate the magnetic reading. Mr. Eun did not specify if or how the wallet would be integrated into Samsung's devices. But speculation suggests the hardware giant could embed the wallet into each of its smartphones (or its numerous tablets and wearables), immediately enabling millions of new avenues for contactless payments.
"For us, it's really about scaling a new method of payment that can get to the masses," said LoopPay co-founder Will Graylin. "What Samsung gives us is the ability to play on a huge stage."
In addition to credit card processing, LoopPay supports loyalty-card programs for advertisers. It could be a lucrative new tool for marketing, particularly if Samsung were to share purchasing data from mobile transactions. Apple has remained stingy with the data coming from Pay. Again, Samsung and LoopPay declined to comment.
Mobile-payment transactions in the U.S. topped $3.5 billion in 2014, according to eMarketer, which expects the total to accelerate to $27.5 billion by 2016. "Samsung's acquisition of LoopPay signals how serious it is about building and launching a competitive mobile payments system," Bryan Yeager, an eMarketer analyst, said in an email.
Apple has not released information on consumer adoption of Apple Pay since October. (The company said over one million accounts were activated in its first month.) In January, Apple CEO Tim Cook said over 750 banks and credit unions have signed on to enable Pay. The service has reportedly had difficulty progressing in China, one of Apple's largest growth markets.
Samsung, which has a wider global footprint, did not specify if LoopPay would expand beyond the U.S. Mr. Graylin's said his company's technology "works just about anywhere in the world."
The acquisition marks the second significant purchase orchestrated by Mr. Eun, a Silicon Valley veteran charged with tying the conglomerate to younger technology as it moves into new markets, like the connected home and wearables. In August, he led the purchase of SmartThings, a connected-device platform that integrates and competes with products from Apple and Google.
One out of every five smartphones sold worldwide is from Samsung. Yet its share has slipped quickly in the past year in the face of increase pressure from Apple and new Chinese competitors.