After Apple launched Apple Pay for the South Korean market, Samsung is changing its overall strategy around Samsung Pay.
Samsung’s mobile payment service is currently free to consumers and credit card companies. However, Samsung plans to charge credit card companies in a similar manner to Apple.
According to Business Korea, Samsung Electronics has notified all credit card companies in South Korea that it will no longer extend the Samsung Pay service for free. First launched in 2015, Samsung Pay has been a free service for credit card companies (banks) and consumers (Galaxy phone owners). In the future, however, Samsung will start charging a nominal fee to credit card companies in South Korea. The strategy is expected to expand to all markets around the world where Samsung Pay is available.
Credit card companies say they have heavily promoted Samsung Pay to more than 16 million users over the past eight years and believe it will remain free, the report said. Now, they were blindsided by Samsung. In order to cut costs, they may reduce the benefits provided to end users. While the South Korean government says contracts between companies are autonomous, it may intervene if the charges are passed on to consumers.
Financial industry insiders speculate that Samsung’s decision is closely related to the recent debut of Apple Pay in South Korea. A credit card company executive said, “After Hyundai Card, other card companies are also planning to launch Apple Pay, so Samsung Electronics can no longer wait and see. I think Samsung Electronics thinks, ‘If the credit card issuer pays for Apple Pay, why should the credit card issuer pay for Apple Pay? Don’t merchants pay for Samsung Pay?’”
Some analysts believe Samsung is trying to increase the fees paid by credit card companies that have not yet adopted Apple Pay to put pressure on them in the negotiations. “No decision has been made on Samsung Pay yet,” a representative of Samsung Electronics said. Market watchers expect Samsung to begin specific talks with credit card companies by Aug. 10.
It is learned that Samsung has also carried out a series of initiatives to counter Apple Apple Pay in South Korea. For example, Samsung Pay has cooperated with Naver Pay to enable users to make online payments through Samsung Pay. Samsung also plans to activate Samsung Pay on the Galaxy Watch in South Korea to compete with Apple Pay.
