As Samsung pitches its mobile wallet to banks in the U.S., the Korean company believes it has the opportunity to build something better with banks.
It also believes it has a few advantages in winning them over. It doesn't charge transaction fees, the other mobile wallet providers have done the hard work of convincing bankers of the benefits of mobile payments and it has two former U.S. bankers leading the charge.
Meet Thomas Ko, the former global head of mobile banking at Citigroup who serves as global general manager of Samsung Pay, and Haley Kim, a former senior vice president in Wells Fargo's innovations and payments division. She is Samsung Pay's vice president and oversees launches and operations for the Americas.
Ko says he moved to the electronics manufacturer after having difficulty trying to push change from within the bank.
"I feel proud, as a banker, coming to an electronics company and being able to support and lead the future of banking, which is digital," said Ko, who is the global general manager of Samsung Pay. "Being able to do the things I wasn't able to do in the bank – but am able to do here, things that are near impossible to do because of the risks banks aren't normally able to take – is very exciting."
Observers say their banking background is a major asset to Samsung because they can understand both the banking and tech sides. Leaders with great understanding of the banking industry and the experience to push a product forward also know the relevant players.
"Selling [is best] done inside the banks, to the banks, to the network with payments executives around who ensure the idea of the technology is well understood," said Ramesh Siromani, a partner in the financial institutions practice of A.T. Kearney, a global strategy and management consulting firm.
That connectivity will be important, too, as Samsung plots its future in banking beyond the mobile wallet.
Mobile devices are now the most important channel for banks, Ko said, and now that electronics companies and mobile phone manufacturers are developing security, identification, verification and cloud infrastructure, there is an entire suite of products they can offer financial institutions, including fraud reduction and risk mitigation solutions.
Samsung is trying to build a core ecosystem with banks, which Ko said are growing more interested in the prospect of such offerings too, as they struggle to innovate internally and within the confines of their regulatory borders.
"Many banks are looking at us as a trusted partner who brings what they don't have – technology and enablement of core services on the most important device of future: the mobile phone," Ko said. "Banks have risk-taking compliance structures we don't have, and don't want to have."
Essentially, Samsung is eyeing a long game with banks.
"Bank customers are also Samsung device customers and we see the commonality of serving the same customers," he said. "It is a very mutually exclusive arrangement from the business perspective and allows us to transparently ask banks to invest and work together with us."
But the company still needs mobile payments to gain traction.
Currently, Samsung Pay is forming a new bank partnership every week or two, according to Ko.
In some ways it is benefitting from the competition. Apple did much of the heavy lifting in introducing banks to mobile wallets when it introduced Apple Pay a couple of years ago. Apple also charges banks transactions fees. Samsung doesn't making any fee revenue from card issuers. It believes its product is the phone, so its revenue comes from those sales, and Samsung Pay functions as a differentiator to fuel phone sales.
Samsung was also spared from having to teach its partners about the software — with the exception of Samsung's Magnetic Secure Transmission technology, which is a unique feature that lets Samsung Pay make wireless payments on ordinary magstripe terminals. As the tech giant honed and tweaked its product, its partners were cooperative, Kim said.
Samsung Pay's biggest obstacle is consumer behavior, rather than direct competition, Kim said. Samsung is the dominant player in its home country of Korea. Some 90% of retailers in Seoul accept Samsung Pay, understand it and are familiar with customers using it as a payment method. But consumers in other countries have a mental barrier to mobile payments that have made them slower to adapt.
It'll be a long time before anyone can determine a winner in the space.
"It would be great if it is Samsung Pay, but it doesn't have to be," Kim said. "At this point, everyone needs to be successful – that's how mobile payments will get adopted – and then move to the mainstream through early adopters."
Between Citi and Samsung, Ko launched his own venture, Namu, a mobile banking platform that relies on emotions and social relationships. It won Best of Show at Finovate in 2015.
Kim, meanwhile, joined Samsung Electronics in May 2014 to work on the launch of Samsung Pay as a business initiative for the company.
Kim was placed at the head of the U.S. business just months ahead of Samsung Pay's product launch. The experience of coming into this world from a major U.S. bank was a major culture shock, she said.
In January, Kim "was given a heads up for the [originally planned] July U.S. launch," she said. "There was not even a single signed contract with a bank then. I said, 'Hey, I just want to give you accurate expectations. Getting even one contract signed could take six months at a bank.'"
Bank partners were skeptical, too.
"They didn't believe the timeline," said Kim. "When we said we would launch in July, they didn't believe us, they said, 'You can't really do this.'"
The bankers turned out to be right, but not by much. Samsung Pay launched in September, two months behind schedule. Still, Kim said it was a faster process than anything she ever experienced in banking.
"One day at Samsung is like three days at a bank," she said. "So much gets done."