The arrival of Apple Pay in Korea has forced Samsung to change its development strategy. Samsung has never charged banks and card issuers for the past eight years of Samsung Pay service, but it will follow Apple Pay’s lead and start charging banks.

According to Korean media Pulse News, Samsung is working on a new marketing strategy that will charge different banks for different cards, but will be able to rebate the banks for certain activities.

This marketing strategy is similar to how global payment processing companies such as MasterCard and Visa market their products.

Samsung has not yet confirmed the fee structure and may take a variable pricing approach that takes into account factors such as the issuer’s market share and payment volume.

Reports say Samsung has sent notices to 10 credit card companies that it will not renew their contracts. If it charges 0.15 percent, as Apple does, credit card companies could pay 70 billion won per year.

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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.

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South Korean financial authorities say Apple Apple Pay’s 0.1 percent and 0.15 percent fees could be levied not only on consumers and stores but also on credit card companies. Apple and Samsung are expected to levy payment fees on merchants and others. South Korea’s Naver Pay and Kakao Pay are expected to eventually adopt this business model as well.

While Samsung has yet to comment on the arrival of Apple Pay in South Korea, based on metrics, Samsung Pay could lose a significant user base in the country. Samsung Pay has become the largest digital card payment service in South Korea with its Galaxy smartphone. It debuted in August 2015 and currently has a user base of 16 million, with cumulative payments of about 182 trillion won (currently about 970.6 billion yuan, or about $139.8 billion).

The NFC technology used by Apple Pay is based on the EMV contactless standard of Europay, MasterCard and Visa. Samsung Pay, which supports both MST and NFC, has been available for free since its launch. Only a service activation fee was charged.

Industry sources said, “Samsung Electronics launched the free service to increase and retain Galaxy smartphone users, but Apple Apple Pay is changing the market and Samsung Electronics may consider charging a fee.” Apple will work with South Korean credit card company Hyundai to bring Apple Pay to customers in that country. Apple Apple Pay will be coming to South Korea “soon,” but the exact timing has not been announced.

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