Mobile Carriers Still a Speed Bump in the Road to Mobile Payments

The major U.S. telcos may have abandoned their mobile wallet ambitions when they sold off Softcard, but their power casts a shadow over efforts to build ubiquity across the market.

Verizon Wireless, in particular, seems to act as a regular barrier to new payment systems coming to market. It was among the most outspoken opponents of the first version of Google Wallet, preventing it from operating on its network until Google changed the fundamental technology behind the app. And as of Aug. 20, Verizon is the conspicuously absent from the list of carriers supporting Samsung Pay, which is set to begin a beta deployment in the U.S. on Aug. 25.

AT&T, Sprint, T-Mobile and U.S. Cellular will support Samsung Pay for its U.S. launch, enabling the app to come pre-loaded on any Galaxy S6 edge+ and Galaxy Note 5 smartphones they sell. The earlier Galaxy S6 and S6 edge models will receive the Samsung mobile wallet through a software update.

A Verizon spokesperson said the telco is evaluating Samsung Pay and would keep its customers updated on any news regarding the service, but there is no timetable for that evaluation. A Samsung spokesperson said it is in discussions with a "number of partners" to provide greater access to its mobile wallet.

Oddly, Verizon is one of the telcos that will proactively support Android Pay, the upcoming successor to Google Wallet. The telco committed to pre-load Google's mobile wallet on its phones when it sold off assets of the Softcard venture to Google early this year. Softcard was created by AT&T, Verizon and T-Mobile.

Prior to this deal, the carriers' mobile wallet was a competitor of Google Wallet; since the carriers are now on Google's side, some may be reluctant to give too much power to yet another company.

"Since there is a battle brewing between Android Pay and Samsung Pay, this begs the question: What will it cost mobile wallet developers to get their products into the channel?" said Tim Sloane, vice president of payments innovation for Mercator Advisory Group, noting the Softcard Android Pay agreement. "So perhaps Verizon is holding out to get a better deal out of Samsung."

The use of corporate leverage to "freeze out" competitors has also popped up in other parts of the mobile payment ecosystem in recent months.

Rite Aid, which signed on with the Merchant Customer Exchange's upcoming CurrentC wallet, famously blocked Apple Pay after it launched in late 2014. Only recently did Rite Aid lift its ban to accept Apple Pay and other mobile wallets. CVS, another MCX participant that blocked Apple Pay when Rite Aid did, has yet to change course.

Apple Pay and Google Wallet/Android Pay rely on Near Field Communication signals to transmit payment data to properly equipped payment terminals. Samsung Pay uses the same technology, but it adds a system that can also work wirelessly with traditional magnetic-stripe card readers.  

"We still see the technology as in its infancy and that at one point there will be a need for some agnostic concept across the board," said Cindy McGinness, manager of digital channels for PSCU, a credit union service organization with about 200 member credit unions, which recently announced it would support Samsung Pay in addition to mobile wallets from Google and Apple that it has supported all along.

"All of these mobile payment opportunities are bringing something a little unique to the table," McGinness said. "They are device specific and credit union members carry a wide range of mobile devices."

Synchrony Financial, one of the first issuers to offer private label credit card access to consumers on the Samsung Pay mobile wallet, is also expanding the mobile wallet technologies it supports, including Apple, Android and Samsung. Synchrony's Samsung partnership will be available to 12 million consumers and will be offered at 300,000 locations upon Samsung Pay's launch.

"The consumers will decide what model works," said Carol Juel, Synchrony's CIO. "We are agnostic."